As Treasurer Josh Frydenberg MP said “in 2020 Australians have been tested like never before. Flood, drought, fires and a global pandemic”.
As expected, the year we’ve experienced unleashed a budget with a significant amount of spending as a means to kickstart the economy.
Understanding the budget can be complex, so we're here to help you wrap your head around what's relevant to you. If you wish to read our full Kelly+Partners Budget Report please click here.
What does the 2020 budget mean for your personal finances?
Tax Cuts for Taxpayers
The 2020 budget has been designed to put additional money into the pockets of taxpayers through tax cuts and offsets. One way money is being channelled back to Australians is through the Government’s JobMaker Plan. The tax cuts originally slated for July 2022 will be brought forward and backdated to 1 July 2020, meaning Australians will get their money sooner rather than later to start boosting the economy.
If you earn between $45,000 and $90,000, you’ll be able to take home an extra $1,080. Meanwhile, if you earn more than $90,000 you’ll take home up to $2,565. Finally, earning more than $120,000 means you’ll receive the maximum benefit of $2,565. We’ve summarised this into the table below for incomes of $45,000+:
The low and middle-income tax offset will also remain. The offset is currently worth $255 for people earning up to $37,000 and up to $1,080 for people earning between $37,001 and $90,000. Please note that if you earn between $90,001 and $126,000, the offset gradually phases out.
These changes will provide immediate tax relief to individuals, a welcome sum for Australians who have endured prolonged financial hardship throughout 2020 so far. The Government's goal here is for the extra money to boost spending, which will in turn support economic recovery and increase jobs.
What does the budget mean for your business as an Australian Business Owner?
Businesses are set to receive $31.6 billion from a slew of tax breaks. It is hoped that these measures will generate $200 billion in spending. If you’re a business owner in Australia right now, knowing if you’re eligible for tax breaks, additional funding or other benefits is power.
JobKeeper Replacement for Australian Business - Introducing JobMaker
The Budget has left March 28 as the official JobKeeper end date, with no further extension included for small businesses and employees.
However, the Government has instead introduced The JobMaker Hiring Credit which will partially subsidise the wages of young employees who are hired from October 7, 2020. This new incentive is designed to encourage and boost hiring and employment Australia-wide as businesses and business owners are urged to create new jobs.
The JobMaker credit will be available to eligible employers who create additional jobs. However, strict conditions and criteria are in place for businesses to receive the credit.
As a business owner, you’ll be able to claim $200 per week for hiring eligible employees aged 16 to 29 years or $100 per week for an employee aged 30 to 35 years.
On top of age, to be deemed eligible employees will also need to:
- Have previously been on JobSeeker, Youth Allowance or the Parenting Payment for at least one of the past three months
- Have started working for the claiming business between October 7, 2020 and October 6, 2021
- Work an average of 20 hours per week
The credit will be available for up to 12 months from the date of employment with a maximum amount of $10,400 per additional new position created.
From 7.30pm on Budget Night (October 6, 2020) until June 30, 2022, businesses with a turnover of up to $5 billion will be able to deduct the full cost of eligible depreciable assets. This figure represents 99% of businesses, meaning this measure will help around 3.5 million Australian businesses. This change is designed to further encourage businesses to spend and invest by reducing the amount of tax businesses need to pay.
Instant asset write-off extended
The current instant asset write-off has been extended to 30 June 2021. This means if your business has a turnover of up to $500 million, you’ll be able to instantly write-off multiple assets worth up to $150,000 each. This six month extension further encourages spending.
Loss carry back
Companies with a turnover of up to $5 billion will be able to “carry back” tax losses made in the 2020 to 2022 income years to offset against profits made in an earlier income year. Currently, your company can only use tax losses to offset future profits. Now, your business can receive a cash refund for taxes paid on profits made in the 2019 and later income years. This measure will be available to around 1 million businesses across Australia.
Greater access to small business tax concessions
The Government will expand access to a range of small business tax concessions by increasing the small business entity turnover threshold for these concessions from $10 million to $50 million. The concessions include immediate deductions for certain start-up expenses and prepaid expenditure, FBT exemptions for car parking, phones and laptops provided to employees, and access to simplified trading stock rules.
What else is the Government investing in?
The Government has committed to investing in infrastructure, residential construction and the energy industry as the future of Australian jobs and a key ingredient to stimulating the economy.
The Government will invest an additional $14 billion towards new and accelerated road and rail projects over the next four years. These projects will support a further 40,000 jobs during their construction. With unemployment expected to reach 8% by the end of the year, these projects will help dramatically to ease the burden.
The Government has announced a number of measures to boost housing demand while creating new jobs. If you’re looking to enter the housing market, the HomeBuilder program will provide eligible owner-occupiers, including first home buyers, with a tax-free grant of $25,000 to build a new home or rebuild. The First Home Loan Deposit Scheme will be extended by an additional 10,000 places. This Scheme supports first home buyers in building a new home or purchasing a newly built home. The Government is also supporting housing investment through low-cost financing and simplified lending laws.
The Government has announced increased spending on gas, fuel, electricity and renewable energy to help secure Australia's energy supplies and in turn, reduce emissions.
While cash handouts are an essential step to economic recovery in this post-COVID environment, the economic impact of 2020 will see Australia’s gross debt reach $1 trillion next financial year.
We have prepared a full report and rundown on the Federal Budget, for more information please click the button below:
If you have any questions about how the 2020 federal budget impacts you, your future or your business please get in contact on 1300 932 584 and if you're an existing client reach out to your Client Director.