Federal Budget 2020/21
- Published: October 14, 2020
- Author: Asparq
Asparq Federal Budget Presentation
- On the 6th of October 2020, Josh Frydenberg handed down the Federal Budget that has been called by many to be the most important since World War Two.
- Total economic support will reach $507 billion – including $257 million in direct economic support.
- The cost of economic support has resulted in a budget deficit of $213.7 billion, which is projected (all going well) to fall to $66.9 billion by 2023/24.
- This budget has a large emphasis on job creation, driving down unemployment and stabilizing and reducing debt once the unemployment figure is sitting comfortably under 6%.
Originally planned for 1 July 2022, changes to personal income tax brackets have been bought forward and backdated to 1 July 2020.
The changes include:
- raising the 19% bracket from $37,000 to $45,000; and
- raising the 32.5% bracket from $90,000 to $120,000.
Additionally, the low-income tax offset will be increased from $445 to $700 effective 1 July 2020. Individuals with a taxable income below $37,500 will be entitled to the full non-refundable tax offset, and the offset will taper off as follows:
- 5 cents in the dollar for earnings between $37,500 and $45,000; and
- 1.5 cents per dollar for earnings between $45,000 and $66,667.
The low- and middle-income tax offset (of up to $1,080) will also remain in place for another year.
CGT Exemption for granny flat arrangements
- If approved by parliament, a CGT exemption will apply from 1 July 2021 for granny flat arrangements with a written legal agreement in place;
- This includes the creation, variation, and termination of granny flat arrangements; and
- Only agreements entered into because of a family relationship are eligible (no commercial rental agreements).
- Employees will keep their superannuation fund when they change jobs, so their new employer will pay into their existing fund rather than create a new one.
- An online super fund comparison tool will be introduced.
- Benchmarking tests will be conducted by APRA on super funds (My Super accounts); and
- a new duty will be imposed on superannuation trustees to act in the best financial interests of members.
First Home Buyers
- An additional 10,000 places will be added to the fully subscribed first home loan deposit scheme, enabling eligible first home buyers to purchase a new or newly built home with a 5% deposit (without incurring costly mortgage insurance); and
- Caps on the value of eligible new homes have been increased Australia-wide.
$4 billion hiring credit
For every job created of 20 hours per week or more, eligible employers will be able to claim a JobMaker hiring credit from 7 October 2020 to 5 October 2021. The credit amounts to:
- $200 for 16-29 year olds; and
- $100 for 30-35 year olds.
The Apprenticeship wage subsidy that was announced prior to the budget will also be expanded to allow a business of any size to claim.
Instant asset write off
Businesses with a turnover of up to $5 billion will be able to claim an immediate tax deduction (uncapped) for eligible depreciable assets, provided that certain conditions are met.
Loss Carry Back for companies
Eligible companies with a turnover of under $5 billion will be able to offset current year tax losses against tax paid during or after the 2018-19 income year, thus generating a tax refund from the ATO.
Example: a company made a profit in 2018-19 of $100,000 and paid tax of $27,500 on that profit. The company went on to make a loss of $50,000 in 2019-20. Normally this loss would be “carried forward” to its 2020-21 tax return, reducing the tax payable in the future. It can now elect to use the loss to reduce the amount payable on the 2018-19 profit, thereby securing a refund of $13,750 ($50,000 x 27.5%).
Proposed to begin from 2 October, retraining or reskilling costs for redundant employees will be exempt from Fringe Benefits Tax. This exemption applies for retraining for a role within or outside the current employer’s business.
The information contained herein is of a general nature only and is not intended to be relied upon nor is it a substitute for appropriate professional advice. Whilst all care has been taken in the preparation of the material, it is not guaranteed to be accurate. Individual circumstances are different and as such require specific examination. Asparq cannot accept liability for any loss or damage of any kind arising out of the use of or reliance upon all or any part of this material. Additional information may be made available upon request.