What does it mean for you?
Australian Government’s 2020-21 Budget
At 7:30pm (AEDT) on Tuesday 6 October 2020, the Australian Treasurer, Josh Frydenberg,
released the Australian Government’s 2020-21 Budget. After going into a record deficit of $213.7 billion in 2019-20 to support individuals and businesses during the COVID-19 pandemic, the focus of this year’s Budget is to regrow the economy by creating job opportunities and encouraging spending. The forecasted Budget outcome for 2021-22 is a deficit of $112 billion.
We’ve put together this report to make sure you don’t miss any of the essential information. It’s worth noting that the tax proposals summarised below have passed parliament, however the other proposed measures aren’t law yet – and could change.
Personal Income Tax Cuts
This financial year, some 11 million individuals will benefit from income tax cuts being brought forward. For those earning between $48,000 and $90,000, the tax relief will be $1,080. Those earning between $90,000 and $120,000 will receive between $1,080 and $2,430 in tax relief and anyone with incomes above $120,000 will receive the maximum $2,430.
Depending on your income level, your tax cuts may be delivered via the Low Income Tax Offset, the Low And Middle Income Tax Offset (LMITO) and/or adjustments to the income tax scales.
Unfortunately, if you’re earning between $48,000 and $90,000, your $1,080 tax cut is solely due to the LMITO, which will be discontinued from next financial year. This means you'll lose this tax benefit from 1 July 2021. Also, if your employer isn't utilising the ATO's PAYG Withholding Tax Ready Reckoner for Tax Offsets when calculating how much tax to withhold from your pay packet, you'll need to wait until you submit your 2020-21 income tax return before you receive your $1,080 benefit.
Other income earners may receive part of their income tax cuts shortly, with the remainder to be received upon submission of their 2020-21 income tax return.
If you’d like to calculate your tax cut for this financial year, you can do so here - Click here
Your Future, Your Super
From 1 July 2021, the Government proposes to implement a ‘Your Future, Your Super’ package to improve outcomes for super fund members. The rollout will be phased and comprises of four key initiatives:
- Your super account follows you when you change jobs - to avoid creating a new super account each time you change employers.
- A new interactive online ‘YourSuper’ comparison tool will be available to help you decide which MySuper product best meets your requirements
- MySuper products will be subject to an annual performance test and if they’ve underperformed for two consecutive years, they’ll be prohibited from receiving new members until they get things back in order.
- A strengthening of obligations on super trustees to act in the “best financial interests” of members.
Temporary Early Access to Super
To support individuals affected by the financial impacts of COVID-19, eligible individuals were able to access up to $10,000 of their superannuation before 1 July 2020.
Since 1 July 2020, eligible individuals have also been able to apply for a withdrawal of up to $10,000. Withdrawal requests must be submitted via the myGov portal no later than 31 December 2020. It’s important to keep in mind that only one withdrawal request is permitted for the period between 1 July 2020 and 31 December 2020.
Withdrawals under this temporary relief measure are tax free and are not treated as income for Social Security means testing purposes. More information on the eligibility requirements and the withdrawal request process can be found here - Click here
Self-managed Superannuation Funds
Current regulations impose a maximum of four members per self-managed superannuation fund. The Government proposes to increase this limit to six members, to avoid families with five and six members from having to establish two separate self-managed superannuation funds. The proposed start date will be from the date of Royal Assent of the enabling legislation.
The Government proposes to provide two separate $250 economic support payments to be
made from early December 2020 and early March 2021 to eligible recipients of the
- Age Pension
- Disability Support Pension
- Carer Payment
- Commonwealth Seniors Health Card
- Eligible DVA payments
- DVA Gold Card
- DVA Seniors Card.
Individuals not receiving any of the above benefits may still qualify for an economic support payment if they receive any of these benefits:
- Carer Allowance
- Pensioner Concession Card (PCC)
- Family Tax Benefit.
If you’re eligible for one of the above benefits on 27 November 2020, you will be eligible for the December 2020 payment. If you are eligible for one of the above benefits on 26 February 2021, you will be eligible for the
March 2021 payment.
These economic support payments are exempt from taxation and will not count as income for the purposes of any income support payment.
Temporary Full Expensing of Depreciable Assets
From 7:30pm (AEDT) on 6 October 2020 until 30 June 2022, the Government will allow businesses with annual aggregated turnover of less than $5 billion to deduct the full cost of eligible depreciable assets of any value in the year they are first used or installed ready for use.
Full expensing will apply to new depreciable assets and the cost of improvements to existing eligible assets. However, for businesses with aggregated annual turnover of less than $50 million, full expensing also applies to second-hand assets.
In addition, the Government will provide businesses that hold assets eligible for the enhanced $150,000 instant asset write-off (businesses with an aggregated turnover above $50 million but less than $500 million) with an extra six months (until 30 June 2021), to first use or install those assets.
Temporary loss carry-back
The Government is proposing to allow losses incurred in the 2019-20, 2020-21 and/or 2021-22 financial years, by businesses with aggregated annual turnover of up to $5 billion, to be carried back and offset against profits made in or after the 2018-19 financial year. This is a major win, albeit temporary, for businesses as ordinarily tax losses can only be used to offset future taxable income.
Eligible businesses may elect to receive the tax refund when they lodge their 2020-21 and 2021-22 tax returns. Businesses that do not elect to carry back losses under this measure can still carry losses forward as normal.
Boosting apprenticeships wage subsidy
From 5 October 2020 to 30 September 2021, eligible businesses of any size will be reimbursed up to 50% of an apprentice or trainee’s wages up to $7,000 per quarter (subject to a national cap of 100,000 places).
JobMaker Hiring Credit
From 7 October 2020, eligible employers will be able to claim the JobMaker Hiring Credit for each eligible employee for up to 12 months from the date of employment of the eligible employee.
Eligible employers who can demonstrate that the new employee will increase overall employee headcount and payroll 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.
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This update is issued by Wealth Market Pty Ltd ABN 56 128 350 112, AFSL 482898 (Wealth Market) and is current as at 8 October 2020. It does not constitute financial product advice, taxation advice or advice on social security laws. Before making a decision about a financial product or about taxation and social security related matters, we strongly recommend that you obtain financial product advice, as well as taxation and applicable social security advice, from qualified professional advisers who are able to take into account your circumstances. This update is a guide only and based on Wealth Market’s understanding of the 2020-21 Federal Budget Report and current taxation and (where relevant) social security laws. These laws may change and the proposals mentioned in the 2020-21 Federal Budget Report may not become law. In preparing this update, Wealth Market relied on publicly available information and sources believed to be reliable, however, the information has not been independently verified by Wealth Market. While due care and attention has been exercised in the preparation of this information, Wealth Market gives no representation or warranty (express or implied) as to its accuracy, completeness or reliability. The information presented in this update is not intended to be a complete statement or summary of the matters to which reference is made in this update. To the maximum extent permissible under law, neither Wealth Market nor its related entities, nor any of their directors, employees or agents, accept any liability for any loss or damage in connection with the use of or reliance on all or part of, or any omission inadequacy or inaccuracy in, the information in this update.