The Federal Government last night made announcements aimed at stimulating the Australian economy in the aftermath of the coronavirus pandemic and the bush fire season – which many may have forgotten. The Australian economy was predicted to contract by 4.5% in 2020.
Spending on tax initiatives and infrastructure investment was announced, which will see a record deficit sky rocket to $200 Billion, and Australia’s total debt head towards $1 Trillion dollars.
This may have been the most watched budget speech in Australian history. Focusing on generating jobs, building infrastructure and spending aimed to lead a crippling economy out of recession – the first in 29 years. Our summary of the key highlights are below.
JobMaker Hiring Credit
Businesses will receive an incentive to hire an eligible employee aged between 16-35 years who received either JobSeeker payments, Youth Allowance or Parenting Payment for at least one of the previous three months. The incentive will be payable for 12 months. Employees must work at least 20 hours per week and it is expected to assist 450,000 positions for young Australians.
$200 per week – aged 16-29 years
$100 per week – aged 30-35 years
Personal Income Tax Cuts
Backdated tax cuts to 1 July 2020 was a key announcement in the Federal budget. These previously legislated tax cuts have been brought forward from the 2022-2023 financial year. The low-income tax offset will increase from $445 to $700, increasing the top income threshold of the 19 per cent bracket from $37,000 to $45,000; and increasing the top threshold of the 32.5 per cent bracket from $90,000 to $120,000. More than 11 Million taxpayers will benefit from this tax cut.
Additional support will be provided to low and middle-income earners with the continuation of the low and middle income tax offset (LMITO) for the 2021 income year. The LMITO is worth up to $1,080 for individuals or $2,160 for dual income couples. This benefits taxpayers the most with taxable income between $48,000 ad $90,000.
For aged pensioners, a bonus payment of $250 will be paid in December 2020 and March 2021.
Tax-free business support grants
The Government has announced that the Victorian Government’s Business Support Grants for small and medium businesses, as announced on 13 September 2020, are non-assessable, non-exempt income for tax purposes. The Government may extend this arrangement to similar future grants from all States and Territories on an application basis. Eligibility for this treatment will be limited to grants announced on or after 13 September 2020 and for payments made between 13 September 2020 and 30 June 2021.
Business cash flow support
The Treasurer, Josh Frydenberg, handed down announcements to reduce red tape, simplify business compliance and assist with creating employment.
Key announcements included –
- Temporary full expensing of depreciable assets for businesses with turnover below $5 billion. From 7:30pm (AEDT) 6 October 2020, over 99% of businesses will be able to write off / expense eligible new assets in full until 30 June 2022.
- Companies have a temporary loss carry-back measure. The loss carry back allows companies to offset tax losses against previous profits and tax paid. Companies with turnover up to $5 billion can apply tax losses during 30 June 2020, 2021 and 2022 income years to offset tax paid in the year ended 30 June 2019 or later years. This is available when Companies lodge their 2020-21 and 2021-22 tax returns.
- This measure interacts and assists businesses in the investment of business assets with the new full expensing of depreciable assets noted above. However, it will apply for new assets acquired after 6 October 2020.
- Other measures for eligible Small Business Entities that apply from 1 July 2020 include –
- Ability to immediately deduct certain start-up expenses and certain prepaid expenses.
- Access to the simplified trading stock rules
- Remit Pay As You Go (PAYG) instalments based on GDP
- Will have a two-year amendment period apply for income years from 1 July 2021
Growing Australia’s skilled workforce
- $1.2 Billion in funding new Apprentices – employers will be entitled to up to $7,000 per quarter for new apprentices hired on or after 5 October 2020, capped to 100,000 apprentices
- $49.5 million to fund an additional 14,485 places in the Skills for Education and Employment program for new job seekers who lack basic language, literacy and numeracy skills to training and support.
- $251.8 million over two years to support the delivery of 50,000 higher education short courses. Short courses will be online in areas such as teaching, health, science, information technology and agriculture.
- $298.5 million over four years for an additional 12,000 undergraduate Commonwealth Support places in 2021.
- An FBT exemption for retraining and reskilling benefits provided by an employer to redundant, or soon to be redundant employees where benefits may not be related to their current employment. This measure is designed to assist redundant workers to transition to new employment opportunities within or outside an employer’s business (e.g. prepare for a new career path).
- From 1 April 2021 eligible businesses will be exempt from FBT on car parking and multiple work related portable electronic devices, such as phones or laptops provided to employees.
- The Government also announced reducing the compliance burden of FBT record keeping.
Removing CGT for ‘granny flat arrangements’
- A targeted CGT exemption will apply from 1 July 2021 (subject to the passing of legislation), for ‘granny flat arrangements’.
- Broadly, these involve older Australians or people with disabilities transferring their home or the proceeds from the sale of their home (and/or other assets) to their adult children or other trusted persons in return for the promise of ongoing housing and care.
New & Accelerated Infrastructure
- $110 Billion investment over the next 10 years towards major road and rail, road safety and community infrastructure.
- This is an increase in $10 Billion over the next 4 years aimed to create a further 40,000 jobs
- $2 Billion in significant stimulus over the next two years for “shovel ready programs” across all States and Territories under a “use it or lose it” system to incentivise the prioritising of projects by the States and Territories.
Government & Health Services
Essential services and a strong health care system will continue to be supported by the Federal Government. In 2020-21 funding is estimated to be at $93.8 billion and this will grow to $97.5 billion in 2023-24. This will include investing $375.5 million to include new medicines and access to affordable medicines through the Pharmaceutical Benefits Scheme over four years.
- Providing $19.5 million to improve access to affordability of private health insurance
- Continued investment in schools totalling $309.9 billion to the end of 2030.
- $146.3 million over five years in programs to improve education for vulnerable and disadvantaged young Australians
- $453.2 million until the end of 2021 to support 15 hours per week of quality preschool education for children in the year before school.
- Reforms and funding of $1.6 billion for additional 23,000 home care packages to help people stay at home longer
- An additional $798.8 million over four years for the National Disability Insurance Agency (NDIA) and NDIS Quality and Safeguards Commission.
- $46.5 million over four years to support Indigenous Australians for the National Agreement on Closing the Gap.
Women’s economic security
The Government is investing in supporting increased female workforce participation. The total package is estimated at $240.4 million over five years from 2020-21. Support will be directed as follows –
- $50 million for Women@Work Plan to scale up the Women’s Leadership and Development Program to support job creation in male dominated industries
- Establishment of the Respect@Work Council to address sexual harassment in the workplace
- The Boosting Female Founders initiative expansion, supporting 282 start-ups and 4,300 mentoring engagements for female entrepreneurs
- $25.1 million over 5 years for 500 places into STEM careers (Science, Technology, Engineering and Technology)
- $10 million in grants for the Women in STEM and Entrepreneurship
Modern Manufacturing Strategy
This strategy is aimed at driving growth, delivering higher value jobs and improving of supply chains. A total of $1.3 billion will be committed, focusing on six National Manufacturing Priorities.
- Increase of the First Home Loan Deposit Scheme by a further 10,000 places
- Reforms to minimise the amount of fees paid by members.
- New super accounts will not automatically be created when starting a new job. Super funds will follow you.
- A new online YourSuper comparison tool
Building Regional Resilience
Aimed at assisting regions and communities impacted by COVID-19, devasting bushfires and drought.
- $250 million for a Regional Tourism Recovery Package to support local tourism regions
- $200 million in Round 5 of the Building Better Regions Fund
- $100 million over two years will go towards Regional Recovery Partnerships
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