Brief Insights on the 2020-21 Australian Federal Budget
Brief Insights on the 2020-21 Australian Federal Budget
This week Australian Treasurer Josh Frydenberg presented one of the foremost important and expectedly large Australian Federal Budgets in our lifetime. Here we have the breakdown of the big announcement hence making it more clear and understandable, to see what this means for you and your business.
What it means for taxpayers?
The Government announced the next stage of tax cuts. Accordingly, once the legislation passed Parliament majority of Australians will receive tax refunds. That will be through the rise in 19 per cent threshold from $37,000 to $45,000, and a rise in 32.5 per cent threshold from $90,000 to $120,000.
This means that those taxpayers earning $50,000 per annum will receive $1,080 back, and the group of taxpayers on $90,000 income will receive $1,215 back. The taxpayers with $120,000 income will get $2,565 back. This means more refund for high income earners.
The plan is to backdate the cuts to July 2020, and the refunds will be built into wages until end of 2020-21 financial year.
What it means for migrants?
Australian doors are now closed to international arrivals. This means that Australian migration numbers are expected to fall, which is not a positive thing for the Australian economy.
It is predicted that by the end of 2020-21, the net Australian migration will fall from 154,000 in 2019-20 to 72,000. This is expected however to increase to nearly 201,000 in 2023-24.
Permanent migrants and international students are expected to return to Australia gradually in the late part of 2021.
The good news is for people living in regional Australia under the partner visa. The Government is expediting the family stream visa approvals on a one-off basis. This will increase from 47,732 to 77,300 places for 2020-21 Migration Program.
What it means for Australian businesses?
Under a measure presented in the Australian federal budget 2020, a temporary tax incentive has been provided to businesses with an annual turnover of up to $5 billion. This incentive enables the businesses to immediately write-off the full amount of any purchased eligible depreciable asset. This provides an allowance for business investments in plant and equipment of any dollar value that are installed or used for the first time before 30th June 2020. It is expected that this measures will cost the budget $26.7 billion. The expected outcome is to unlock investment, create more jobs, and increase the productivity within the Australian businesses.
The good news for companies with turnover of up to $5 billion is that they can offset their business losses against their previous profits on which tax has been paid to generate a refund. In the event that companies do not decide to carry back losses under this arrangement, they can still carry forward the losses to the future financial year.
In addition, to increase business cash flow, temporary tax incentive is provided by the government to around 3.5 million business that hire nearly 11.5 million workers.
What it means for low income earners?
It is confirmed in the budget that, the LMIT offset will remains unchanged for another financial year, which means eligible individual taxpayers will get $1,080, and couples will receive $2,160 as Low and Middle Income Tax Offset. When this offset is combined with the offered tax cuts, an individual taxpayer can get back up to $2,745, and dual-income families can get back up to $5,490.
What it means for students planning to get into university?
The government will provide an additional $299 million for universities in the coming year, which will fund 12,000 extra undergraduate places.
The allocated budget will also support 50,000 short online courses to those who want to upskill faster. This support will be provided for courses in health, science, IT, agriculture, and teaching.
What it means for young job seekers?
Businesses will receive more incentives to employ young job seekers, especially people aged between 16 and 35 years old.
A JobMaker hiring credit of $200 per week for 12 months will be paid to employers who employ a job seeker under 30. In addition, for employer who hire a job seeker between 30 and 35 years old will get $100 per week as hiring credit.
In order to receive the JobMaker hiring credit, newly hired employees must have been on JobKeeper, Parenting Payment, or Youth Allowance payments in the three months immediately before the time of hiring and must work at least 20 hours per week.
What it means for young people?
Young people who have lost jobs during this pandemic are addressed in the recent budget.
Employers who employ anyone between the age of 16-30 will receive $200 per week, and if employ workers aged 30-35 will receive $100 per week as part of the newly announced JobMaker Hiring Credit.
This is expected to create 450,000 new jobs for young generation and will be an opportunity for business for one year.
In addition, as it has been announced before, $1 billion JobTrainer program is designed to provide less expensive training for school leavers and $1.2 billion goes towards wage subsidies for 100,000 new apprentices or trainees. Employers will be subsidised 50 per cent of the wages up to $7,000 per quarter, for a new or recommencing apprentice or trainee for the period ending to 30 September 2021.
What it means for young regional Australia?
Businesses in regional areas will benefit the expansion of the instant asset write-off scheme. Also, people who are living in regional areas under partner visas will receive a one-off expedited processing time, to assist farmers looking for fruit picking labour or do other works in the regional areas.
What it means for construction sector?
With the aim of increasing jobs and cash flow in the country, there are a few measures to stimulate building industry. Builders will receive more support for first home buyers to stimulate the market and encourage the first home buyers to purchase new houses.
The first of those measurements is HomeBuilder scheme with a budget of $688 million, which is planned to give cash grants for people to build their new homes or cover the cost of renovating their existing homes.
In addition, an investment of 7.5 billion is expected to go through spending on road and rail projects, a new $2 billion of the budget is allocated for road safety upgrades and $1 billion for local councils to upgrade local roads, street lighting and footpaths.
What it means for manufacturing?
To make the Australian manufacturing more competitive, $1.5 billion will be invested in manufacturing sector over the next four years.
$1.3 billion of the allocated budget in this sector will support projects within six National Manufacturing Priorities, including resources technology and critical minerals processing, defence, recycling and clean energy, medical products, food and beverage, and space.
More investment in digital technologies:
To support businesses to adapt to digital technologies with the purpose to grow their business, $800 million is allocated in the budget. The government’s Digital Business Plan will receive the largest slice of the cake amounting to $419.9 million, which goes towards the full implementation of the Modernising Business Registers (MBR) program. This is expected to provide the opportunity for businesses to view, update and maintain their businesses’ registry data in one location.
In addition, $256.6 million is being invested in developing a digital identity system to improve the security and streamline the engagement of government services. $28.5 million will go towards supporting the rollout of the Consumer Data Right to the energy sectors and banking.
$22.2 million in new funding will be invested to support small-business operators to take the advantage of digital technologies through Digital Solutions program, a Digital Readiness Assessment tool and a Digital Directors training package.
Impacts on the whole economy?
As a result of COVID-19 the Australia’s economy has taken its largest hit since the end of WWII. It is predicted that Australia is facing a budget deficit of $213.7 billion, which is expected to drop to $66.9 billion by 2023-24. Australian debt is predicted to reach $703 billion in 2020-21 financial year and peak at a record $966 billion by June 2024.