A brief overview of the federal budget

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:
 
Tax cuts:
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).

​

​
​ 

• Those earning between $50,000 and $90,000 will be around $41/week ($2,132 pa) better off;
• Those earning more than $120,000 pa will be around $49/week ($2,548 pa) better off.

 
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.
 
Superannuation:
A new package known as 'Your Future, Your Super' will commence on 1 July 2021, subject to legislation passing parliament.  In summary:

1. An individual's superannuation account will be 'stapled' to them meaning that they can use the same fund across different jobs.  This will eliminate multiple funds tied to different employers.
2. An online comparison tool will enable people to compare the performance of their fund with other funds.
3. Funds that under-perform will be held accountable by APRA and may not be able to take on new members.

 
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.
 
Aged care:
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.
 
In summary:
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.

This information is issued by Next Level Financial Services ABN 40 771 964 301, Corporate Authorised Representative No. 461059 of Integrity Financial Planners Pty Ltd ABN 71 069 537 855 (AFSL 225051) and is current as at the date of publication. It is not financial product advice and is intended as a guide only. In preparing this information, Next Level Financial Services has relied on publicly available information and sources believed to be reliable. However, the information has not been independently verified by Next Level Financial Services. While due care and attention has been exercised in the preparation of this information, Next Level Financial Services gives no representation or warranty (express or implied) as to its accuracy, completeness or reliability. The information presented is not intended to be a complete statement or summary of the matters referred to. Neither Next Level Financial Services nor their related entities, nor any of their directors, employees or agents accept any liability for any loss or damage arising out of the use of all or part, or any omission, inadequacy or inaccuracy in, the information presented.

---