On 6th October 2020 the Government announced the Federal Budget. The focus of the budget is paving a road to recovery from the global COVID-19 pandemic and the resulting recession.
Unpacking the Federal Budget 2020.
Earlier this month, Federal Treasurer Josh Frydenberg MP delivered the 2020-21 Federal Budget. Unsurprisingly, the budget primarily looks to deal with the fallout from the COVID-19 pandemic and resulting recession. The COVID-19 pandemic has caused a global crisis that is considered the worst global economic crisis since the Great Depression.
With the announcement of their Economic Recovery Plan the Government have said they are paving a road to recovery centred around rebuilding the economy and creating jobs. The intention is to ensure that Australia emerges from the recession in a strong position.
There are many initiatives being introduced. In this article we aim to detail the key points that we feel are of most benefit to our customers If you would like a full rundown of the budget please go to https://budget.gov.au/2020-21/content/overview.htm.
Lower taxes for individuals
Positively, it is estimated that of the 1.3 million people who lost their jobs or were stood down due to the pandemic almost 60% are now back at work. It is estimated that over 11 million Australians will benefit from the breaks being introduced to taxpayers.
An additional $17.8 billion in personal income tax relief is being delivered which includes an additional $12.5 billion over the next 12 months. This builds on the $8.1 billion in tax relief already delivered for the 2020-2021 year under the already legislated Personal Income Tax Plan.
From 1st July 2020:
- the low-income tax offset will increase from $445 to $700
- the top threshold of the 19% tax bracket will increase from $37,000 to $45,000
- the top threshold of the 32.5% tax bracket will increase from $90,000 to $120,000
- A one-off additional benefit payment up to $1,080 from the low-middle-income tax offset
Business and Investment
A temporary tax incentive will be made available to approximately 3.5 million businesses (over 99% of Australian businesses). Businesses will be able to write off the full value of assets purchased from 6 October 2020 (730pm AEDT) and first used or installed by 30 June 2022. The full cost of eligible depreciable assets of any value will be deducted in the year that they are installed.
The full expensing will significantly reduce the after-tax cost of eligible assets providing a cashflow benefit and creating a strong incentive for businesses to bring forward investment before it expires.
This incentive builds on the enhanced instant asset write off and the accelerated depreciation that was already announced through the Backing Business Scheme. (See our previous article on the instant asset write off www.magnolialane.net.au)
Businesses with turnover up to $5 billion will be able to offset losses against previous profits on which tax has been paid to generate a refund. Losses incurred up to 2021-22 can be carried back against profits made in or after 2018-19.
The aggregated annual turnover threshold has been lifted providing an additional $105 million in tax relief to expand access to a range of small business tax concessions. Businesses with annual turnover of $10 million to $50 million will now be able to access up to 10 small business tax concessions.
An additional $14 billion in new and accelerated infrastructure projects over the next 4 years has been committed. This forms part of the Government’s record 10-year transport infrastructure investment pipeline. Prior to this, the pipeline had been expanded to $110 billion supporting 100,000 jobs on worksites. The additional $14 billion is estimated to support a further 40,000 jobs in construction.
The investment pipeline includes projects in every state and territory. More detail on the investment pipeline can be read here. www.investment.infrastructure.gov.au.
An additional $3 billion towards ‘shovel-ready’ projects to support further job creation and economic recovery has been announced. This is additional to the $2 billion already announced since May 2020. Included in these projects are the delivery of small-scale road safety projects as well as additional funding for the Local Roads and Community Infrastructure Program. These programs are estimated to support over 10,000 jobs over the next two years.
The First Home Loan Deposit Scheme has been extended to an additional 10,000 first home buyers in in 2020-21 allowing them fast track the purchase of a new home. The Scheme allows first home buyers to secure a loan with a deposit of as little as 5% with the Government guaranteeing up to 15% of the loan.
An additional $1 billion will be invested in the Government guarantee of the National House Finance & Investment Corporation allowing this body to increase its bond insurance into the wholesale capital market with the view to attracting more institutional investment into affordable housing for Australians.
These initiatives are in additional to the HomeBuilder program that the Government announced on 4 June which provides eligible owner-occupiers with a grant of $25,000 to build a new home or rebuild an existing home.
Employment and job creation
The Government has launched a $4 billion initiative titled “JobMaker” which will provide hiring credit to employers who hire eligible young employees (aged 16-35). For each eligible employee, $200 per week will be paid quarterly for those aged 16-29 and $100 per week for those aged 30-35. The Government estimates that this initiative should support around 450,000 jobs for young people.
Another initiative titled “JobTrainer” aims to upskill and reskill employees by creating up to 340,000 free or low-cost training places for school leavers and job seekers. An additional $2.8 billion has been committed to protect apprenticeships and trainees. Even further, an additional $1.2 billion has been committed to create 100,000 new apprenticeships and traineeships and a 50% wage subsidy for employers who hire.
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