It is no surprise that the Federal Government has used this budget to kickstart the economy. The focus has been on tax cuts for middle and lower income earners and businesses, benefits for Centrelink recipients, home buyers, and infrastructure spending.
For the first time in a number of years there are no material changes to Superannuation.
But there have been plenty of changes to taxation and benefits.
Please find below our brief summary of the main points of last night’s budget. As always, don’t hesitate to be in touch with any questions.
Fast-tracked tax cuts and wage subsidies for younger workers underline the Federal Government’s budget.
Note: These changes are proposals only and may or may not be made law.
Personal tax cuts brought forward
- Immediate tax relief: ’Stage two’ personal income tax cuts will be brought forward two years, and backdated to 1 July 2020.
- Raised tax brackets: The upper threshold of the 19% tax bracket will rise from $37,000 to $45,000 and the upper threshold of the 32.5% tax bracket will rise from $90,000 to $120,000. This will be worth the equivalent of $41 a week to those earning between $50,000 and $90,000 a year, and approximately $49 a week to those earning more than $120,000 a year (source: https://budget.gov.au/calculator/index.htm).
- Boost for workers on lower incomes: Workers on lower incomes will gain from an extension of the Low and Middle Income Tax Offset for a further 12 months until 30 June 2021, and increase in the Low Income Tax Offset.
Personal tax savings
The below table illustrates the tax payable in future financial years and the potential tax savings compared to 2019/20, for a range of taxable incomes. These figures take into account the proposed personal income threshold and tax offset changes.
Support for pensioners, low income earners, welfare recipients and job-seekers
- Two cash payments: Aged pensioners, carers, disability support and concession cardholders will receive two $250 payments. The payments will be made progressively from 30 November 2020 and early 2021.
- Incentives for employers to hire: A JobMaker Hiring Credit will be paid for a year to businesses who hire an eligible unemployed worker aged 16 to 35. The rate will be $200 a week for people under 30 and $100 a week for people between 30 and 35, and they must work at least 20 hours a week. The JobMaker Hiring Credit is aimed at filling the gap when the JobKeeper scheme ends next March.
- Support to businesses employing apprentices and trainees: A wage subsidy will reimburse eligible businesses up to 50% of a new apprentice or trainee’s wages. Subsidies are capped at
- $7,000 per quarter, per eligible apprentice or trainee, capped at 100,000 places
Your Future, Your Super package commencing 1 July 2021
- Making it easier to choose a super fund: Super fund members will have access to a new interactive online comparison tool, YourSuper, aimed to encourage funds to compete harder for members’ savings.
- Transparency around underperforming funds: To protect members from poor outcomes and encourage funds to lower costs, the Government will require superannuation products to meet an annual objective performance test. Those that fail will be required to inform members and refer members to the YourSuper comparison tool. Persistently underperforming products will be prevented from taking on new members.
- Additional trustee obligations: Super fund trustees need to ensure decisions are made in the best financial interest of members and provide better information on management and expenditure.
Business tax changes
- Immediate tax write-off: Businesses with annual turnover of up to $5 billion can write off the full cost of eligible capital assets acquired from 7 October 2020 and first used or installed for use by 30 June 2022.
- Loss carry-back: Companies with aggregated annual turnover of less than $5 billion will be able to apply tax losses from the 2019-20, 2020-21 and 2021-22 income years against previously taxed profits from the 2018-19 and later tax years by claiming a refundable tax offset in the loss year.
- Specific changes for small business: Small businesses with a turnover of up to $50 million will be able to access up to 10 tax breaks, with fringe benefits tax scrapped on car parking, phones or laptops, simpler trading stock rules and easier PAYG instalments.
First home buyers
- Purchase cap lifted: Up to 10,000 more first home buyers will be able to get a loan to build a new home or buy a newly built home with a deposit of as little as 5% (source: https://budget.gov.au/2020- 21/content/overview.htm). The purchase cap will also be lifted and varies depending on the State and regional area.
This communication has been issued by GWM Adviser Services Limited ABN 96 002 071 749, AFSL 230692, part of the National Australia Bank Group of Companies. An investment with MLC is not a deposit or liability of, and is not guaranteed by NAB.
Any advice in this communication is of a general nature only. Before acting on any advice, we recommend that you consider whether it is appropriate for your personal circumstances. Any tax estimates provided in this publication are intended as a guide only and are based on our general understanding of taxation laws. They are not intended to be a substitute for specialised taxation advice or a complete assessment of your liabilities, obligations or claim entitlements that arise, or could arise, under taxation law. We recommend you consult with a registered tax agent.
Reliance should not be placed by anyone on this document as the basis for making any investment, financial or other decision.