Treasurer, Josh Frydenberg, has handed down the Coalition Government’s Federal Budget 2020-21.
The document outlines that the Commonwealth Government deficit is expected to reach $213.7 billion this year, falling to $66.9 billion by 2023-24. Net debt will increase to $703 billion or 36 per cent of GDP this year and peak at $966 billion or 44 per cent of GDP in June 2024. During a challenging year, the Treasurer however remains positive that while we are in one the largest deficits, Australia is on the way to recovery.
The Government’s revised fiscal strategy includes two phases – a COVID-19 Economic Recovery Plan that targets job creation; and a medium-term phase focused on stabilising and then reducing debt as a share of the economy once the unemployment rate is below 6 per cent.
Below is a summary of key measures announced, with a focus on particular aspects to come at a later date.
Taxation for individuals
As part of the 2020-21 Budget, the Government will bring forward Stage two of our Personal Income Tax Plan by two years. From 1 July 2020:
- the low income tax offset will increase from $445 to $700
- the top threshold of the 19 per cent tax bracket will increase from $37,000 to $45,000
- the top threshold of the 32.5 per cent tax bracket will increase from $90,000 to $120,000
- low-and middle-income earners will receive a one-off additional benefit of up to $1,080 from the low and middle income tax offset (LMITO).
Taxation for Business
- Businesses with a turnover of up to $5 billion will be able to immediately deduct the full cost of eligible depreciable assets acquired from 7:30pm (AEDT) on 6 October 2020 and first used or installed by 30 June 2022.
- The Government will temporarily allow companies with a turnover of up to $5 billion to offset tax losses against previous profits on which tax has been paid. Losses incurred to June 2022 can be offset against prior profits made in or after the 2018-19 financial year.
- The Budget provides $105 million in tax relief to expand access to a range of small business tax concessions by lifting the aggregated annual turnover threshold for these concessions.
- The Government will also enhance previously announced reforms to invest an additional $2 billion through the Research and Development Tax Incentive. These changes will commence from 1 July 2021 and help more than 11,400 companies that invest in research and development. Employer-provided retraining and reskilling for redundant, or soon to be redundant, employees will be exempt from fringe benefits tax.
- Changes to tax deduction rules for self-education expenses unrelated to current employment will also be considered by the government in consultations.
- Employers will also be allowed to use existing corporate records, rather than prescribed records, to comply with their fringe benefits tax obligations.
Employers & Apprentices
- Eligible employers can claim a JobMaker Hiring Credit for each additional new job they create for an eligible employee from 7 October 2020 to 6 October 2021.
- The JobMaker Hiring Credit will be available from the date of employment for up to 12 months and capped at $10,400 for each additional new position created. Eligible employers will receive $200 per week if they hire an eligible employee aged 16 to 29 years, or $100 per week if they hire an eligible employee aged 30 to 35 years.
- The credit will be available for each additional new job created for an eligible employee from 7 October 2020 until 6 October 2021. It will be claimed quarterly in arrears from the ATO starting from 1 February 2021.
- The apprenticeship wage subsidy program announced in the July 2020 Economic and Fiscal Update, will be expanded to allow businesses of any size to claim the subsidy.
- Eligible businesses that employ apprentices or trainees will be eligible to receive up to a 50% wage subsidy, up to $7,000 per quarter, capped at 100,000 places. This new measure will run from 5 October 2020 to 30 September 2021.
Tax residency of foreign incorporated companies
- Companies that are incorporated offshore will be treated as Australian tax residents where there is a “significant economic connection to Australia”.
- An existing superannuation account will be “stapled” to a member to avoid the creation of a new account when that person changes their employment.
- By July 2021 if an employee does not nominate an account at the time they start a new job, employers will pay their superannuation contributions to their existing fund. Employers will obtain information about the employee’s existing superannuation fund from the ATO.
- YourSuper – An interactive online comparison tool will help individuals decide on the best superannuation product to meet their needs.
- From July 2021, APRA will conduct benchmarking tests on the net investment performance of MySuper products. Products that have underperformed over two consecutive annual tests will be prohibited from receiving new members until a further annual test shows that they are no longer underperforming.
- The government has already extended the $86billion JobKeeper scheme until March but is gradually reducing the payments to wean the economy off government support.
- From 28 September to 31 December, JobKeeper has been reduced to $1,200 per fortnight for full-time workers and to $750 for people working 20 hours or less per week.