- The 2020 Federal Budget is a big-spending budget designed to create jobs, increase business and consumer spending and lift the country out of recession
- There are a range of changes that impact individual taxpayers and small businesses including income tax cuts, tax offsets, job programs, education and training programs, health benefits, tax write-offs and carry back loss arrangements and cash payments
- Changes have also been announced to make the superannuation industry more efficient and to increase the retirement savings of Australians
Income tax cuts – benefits people earning more than $45,000 a year
Most Australians will pay less income tax in the 2020/21 financial year because of proposed changes to income tax thresholds. Under the proposed changes the 19% threshold will be increased from $37,000 to $45,000 and the 32.5% threshold will be increased from $90,000 to $120,000. This means people earning more than $37,000 will pay a lower rate of tax on more of their income. The changes will be backdated to 1 July 2020 and most people will see the benefit almost immediately in their take-home pay.
Low and Middle Income Tax Offset – benefits people earning up to $126,000
The existing Low and Middle Income Tax Offset is being extended for another year. People earning $37,000 or less receive an offset of $255 rising to $1,080 for people earning $90,000 and reducing to $0 for people earning $126,000. Since it’s a tax offset it will be received when people lodge their tax returns.
Cash payments – benefits for existing welfare recipients
Pensioners, veterans, low-income families, and concession cardholders will receive two additional cash payments. The payments will be $250 each. The first will be paid in December 2020 and the second will be paid in March 2021.
Health care benefits – mental health and aged care
Medicare will now cover up to 20 mental health consultations (up from 10). This measure will help Australians deal with mental health and the impact of things like last summer’s bushfires and COVID-19.
There will also be 25,000 more aged care home care packages available. These packages help older Australians stay in their homes for longer by subsidising home care services.
The JobMaker program will provide businesses that hire younger workers with a credit of $200 a week for workers aged less than 30 and $100 a week for workers aged 30 to 35, for 1 year.
The wage subsidy for newly hired apprentices and trainees will be extended for a year. The subsidy now applies to small and medium businesses and covers 50% of the wages of eligible apprentices and trainees (capped at $7,000 a quarter) through to 30 September 2021.
Education – help to reskill and increase employment prospects
The government will fund an additional 50,000 places in online short courses in subjects such as teaching, science, IT and agriculture. If you’ve lost your job or had your work hours significantly reduced, then reskilling in one of these areas could help.
Business benefits – especially small and medium businesses
Most businesses will now we able to claim an immediate tax deduction for assets they purchase to use in their business. This will bring forward the tax deductions that would normally be spread over the depreciable life of the assets.
Many businesses will also be able to offset losses incurred in 2019/20, 2020/21, and 2021/22 against profits they make since 2018/19. These new arrangements have been referred to as “carryback loss arrangements”. This will reduce the tax they have paid.
A number of changes have been announced to make the superannuation industry more efficient. The changes include regularly assessing and publishing the performance of funds on a new government web site called “YourSuper”, preventing persistently underperforming funds from accepting new members, discouraging the practice of setting up a new superannuation account when employees start a new job, and increasing accountability for superannuation fund trustees to act in the best interest of members. These changes are expected by 1 July 2021 and are estimated to increase the retirement savings of superannuation fund members by $1.1 billion over the next 10 years.
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This summary has been prepared by MoneyBrilliant Pty Ltd (AFSL 492711, ACL 493068). The information in this summary is of a factual nature only. We are not suggesting or recommending that you take any particular course of action in relation to any financial product or service. It does not take into account your personal circumstances or objectives. If you need financial advice or taxation advice you should seek advice from a licensed financial adviser or tax agent. You may also be able to access additional information from the websites of the Australian Securities and Investment Commission (ASIC) and the relevant product providers.