The 2020 Federal Budget was always going to be historical. With the Government spending $213.7 billion more than it will collect this financial year due to Covid-19 and its resulting affects, the Budget deficit for this financial year unsurprisingly beats any budget shortfall in history. This is mostly due to JobKeeper, JobSeeker and other supports, introduced in March and causing a deficit of over 80 billion dollars.
Over the next financial year, the gross debt is expected to reach more than 1 trillion dollars.
For a deep dive, please see the attached NTAA Federal Budget information for 2020-2021, below.
For a summary on what we know now, read on.
1. Individual Tax Cuts Are In
The Government has decided to bring forward the cuts from 1 July 2022.
These changes will alter the boundaries of the 32.5 per cent income tax bracket, meaning people will pay 19 cents or less for every dollar earned up to $45,000, then 32.5 per cent on ever dollar earned between that and $120,000.
For someone earning between $45,000 and $90,000 the changes are worth $1,080 (on top of the $1,080 provided under the LMITO).
2. Business Concessions Introduced
The Government has introduced new carry back losses rules for certain eligible corporate entities.
Eligible corporate entities with less than $5 billion turnover in a relevant loss year can carry back losses made in:
- 2020–21; and
- 2021–22 financial years.
These can be applied to a prior financial year’s income tax liability in the:
- 2020–21 financial years.
Note that any refunds that arise will be limited by the corporate entity’s income tax liabilities in the relevant gain years. Stay tuned for more updates as this is a game changer for many businesses
3. The Introduction of the JobMaker Scheme
With no changes to the subsidy ending on March 28, 2021, the Budget makes no changes to the overall JobSeeker rate.
However a new subsidy, introduced to combat youth unemployment, is the JobMaker Hiring Credit. New employees- those hired as of or after tomorrow, and aged under 35, will have their wages subsidised by the Government.
Employees will also need to work an average of at least 20 hours a week over the reporting period, and have been on JobSeeker, Youth Allowance or the Parenting Payment for at least one of the past three months.
In addition, companies will be able to claim $200 each week for every employee hired after tomorrow aged between 16 and 29, and $100 each week for every employee aged between 30 and 35.
4. Payments for Pensioners
The Government will further offer support for out-of-work individuals, with two more tax-free payments of $250 to pensioners and others on specific government support .
The payments will roll out in November. A second instalment will roll out early next year.
5. Hey, Big Spender
To motivate the businesses to invest, the Government will offer what they call “temporary full expensing” up to 30 June 2022. Businesses that make new investments will be able to write off the entire cost in one year, with further changes designed to help businesses to more easily offset their tax losses against past profits.
6. The Budget and Employment
The Budget predicts wage growth to remain stagnant, with the unemployment rate expected to peak at 8 per cent between now and the end of the year.
The Treasurer has stated that the Government will not focus on reducing the National debt until unemployment has reached the estimated benchmark of reaching 6 per cent in 2022-23.
7. Economic Assumptions + the Covid Vaccine
The economic assumptions underlying the Budget predict a COVID-19 vaccine will be rolled out to Australians by the end of next year. Widespread outbreaks of COVID-19 (as been seen recently in Melbourne) are deemed as unlikely.
Gradual international recovery is expected following low inbound and outbound travel into late 2021. Net overseas migration is expected to fall by 72,000 individuals.
8. Budget Deep-Dive 2020-2021
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