The Federal Government presented their 2020-21 Budget yesterday and we have summarised the issues which directly impact our clients. Please note that the budget needs to be approved by both houses of parliament and may be subject to changes. So far this is just an announcement and we need to wait for detailed legislation, but the opposition has indicated that they will pass it in substance. We will follow up later with more detailed information but this report will help you to understand the budget as a business owner.
Stage Two of the legislated tax cuts will be brought forward by two years, lifting the 19 per cent threshold from $37,000 to $45,000, and the 32.5 per cent threshold from $90,000 to $120,000.
This would result in tax relief of up to $2,745 for singles, and up to $5,490 for dual-income families compared with 2017-18 if you are on the top marginal rate. Other Taxpayers will still pay less tax but at a reduced level.
These tax savings will be passed on immediately by reductions in PAYG tax deducted from wages and salaries, and reductions in quarterly PAYG instalments for business owners.
The budget includes a range of measures designed to encourage established businesses to spend on plant and equipment, invest in research and development, and also hire or retain workers.
The Instant Asset Write Off for businesses will be extended to businesses with a turnover of up to $5 billion and will be further extended until June 2022. This option is already available for most small businesses but is now extended to larger ones. There will be no change for most of our clients.
There is also a relief for businesses which have been “doing it tough” during the pandemic, with a measure which will enable them to use their losses earlier.
Losses incurred to June 2022 can be offset against prior profits made in or after the 2018/19 financial year.
To encourage businesses to hire younger Australians, the government has announced a new program called JobMaker, which will contribute $200 per week, payable for one year, towards the hiring of people aged 16-35 who are currently on JobSeeker.
The payment for those aged 30-35 is $100 per week.
In vocational training, the budget commits an additional $1.2 billion to create 100,000 new apprenticeships and traineeships, with a 50 per cent wage subsidy for businesses who employ them.
Aged pensioners will receive an additional $250 payment from December and a further $250 payment from March next year.
There is also a package for senior Australians who wish to continue living in their own homes, with $1.6 billion earmarked for an additional 23,000 home care packages, bringing the total to 180,000 places.
As the pandemic has exposed issues in Australia’s globally reliant supply chain, the focus has switched back to manufacturing for national resilience as well as job creation.
The budget includes a $1.3 billion Modern Manufacturing plan to target six key industries, from food and beverage manufacturing to renewable energy and the space industry.
While much of the national focus has been on the pandemic, regional Australia is still suffering the economic impact of the drought and bushfires.
The budget includes $2 billion in concessional loans for farmers and $2 billion for water infrastructure projects across the country to expand the national water grid.
$350 million has been allocated to support regional tourism, while $317 million is earmarked for exporters to continue to access global supply chains.
The NDIS and mental health services
The budget includes an additional $3.9 billion for the National Disability Insurance Service, with the Treasurer assuring “every Australian” that the NDIS would “always be fully funded” under a coalition government.
The budget also doubles the number of Medicare psychological services funded through the Better Access Initiative from 10 to 20.
First home buyers
As telegraphed before the budget, the government announced an additional 10,000 places for first home buyers of new homes under the First Home Loan Deposit Scheme.
The budget also includes an additional $1 billion in low-cost finance for the construction of affordable housing and $150 million in the Indigenous Home Ownership Program for new homes in regional areas.
Long-term or older unemployed:
While these people received a $550 fortnightly coronavirus supplement to their JobSeeker payments in March, this has been cut to $250 and is scheduled to end by December 31.
Self-funded retirees :
Already struggling due to record low-interest rates, which have crimped the returns from the term deposits many of them rely on, this group – who do not get the aged pension – receive nothing in the budget.
While there are incentives for existing businesses, the instant asset write-off is the main measure which new businesses can take advantage of.
There are no specific incentives or programs to encourage start-ups and new businesses.
“CPA Australia is disappointed that the budget does not include any specific assistance for those new to the business. These entrepreneurs also need help to survive having already missed out on JobKeeper, the Cash Flow Boost and several state government grants,” says Ord.