The much anticipated budget was handed down by federal government last night.
As expected the focus is expansionary to pump money into the economy. Below is a brief overview of the key issues that we expect will most impact individuals. Many other initiatives were announced that are targeted specifically at businesses, which we won't detail here but if you would like more information on any business related matters then please contact our office and we'll be very happy to provide that detail.
The key initiatives are:
Not a new initiative as such as cuts to personal tax rates have already been legislated. However, cuts that were intended to commence in the 2022/23 financial year will now commence in the current financial year (ie: backdated to 1 July 2020).
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 an increase in the Low Income Tax Offset.
The pull forward of the changes needs to be legislated, however the opposition has indicated their support. Once the changes pass parliament employers will alter the tax deducted from their employees' wages to reflect the altered tax rates.
There were also changes the Medicare Levy thresholds, which increase the level of income that an individual or family can earn before paying the levy.
Cuts legislated for the 2024/25 financial year remain in place and will replace the 32.5% and 37% rates with a 30% rate.
Support for older Australians, low income earners, welfare recipients and job seekers:
Those receiving support from Centrelink - including the age pension, carer payment/allowance, disability support, family benefit and concession cards (including the Commonwealth Seniors Health Card) - will receive two $250 payments that will be additional to their normal benefits. The first will be made in early December 2020 and the second in March 2021.
Incentives have been announced to encourage employers to hire eligible unemployed people aged between 16 and 35 (to be known as 'JobMaker'). Employers will receive $200/week for eligible new employees aged under 30 and $100/week for those aged 30-35. The scheme commences today and runs for 12 months from the time that the new employee is hired.
No changes were announced to the JobSeeker or JobKeeper initiatives.
A new package known as 'Your Future, Your Super' will commence on 1 July 2021, subject to legislation passing parliament. In summary:
The 2nd and 3rd of the above initiatives will initially be limited to 'My Super' products but may be rolled out more widely thereafter.
The detail of these initiatives is yet to be revealed so we'll provide more information when announced.
No announcement was made of any extension to the temporary early access to superannuation rules permitting those eligible to draw up to $10,000 from their accounts. The existing allowance remains in place until 31 December 2020.
The previously announced halving of the minimum superannuation pension drawdown will remain in place for the 2020-21 financial year.
Changes will be made to the capital gains tax (CGT) arrangements for granny flats, permitting an exemption from the tax in some instances (specifically where a formal written agreement is in place). This measure requires legislation and if passed this financial year will become effective from 1 July 2021.
Further to ongoing changes that will arise from the Royal Commission into aged care, the government will provide funding for an additional 23,000 home care packages.
The initiatives will significantly expand the federal budget deficit, however given the ongoing impact of COVID-19 and the resultant recession it's generally agreed that additional government spending is required. The government is also able to borrow at very low rates of interest, which minimises the impact of borrowing on the bottom line.
We're not expecting any further announcements in the near term given that the next budget will be handed down in May 2021 (this year's budget was delayed due to COVID). However, the government will be keeping a close watch on the economic impact of the pandemic, which is not yet fully apparent. The ongoing lock down in metropolitan Melbourne will also be carefully monitored.
Please contact our office for any further information required.
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