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The winners and losers in the Federal Budget

Josh Frydenberg's presented the 2020 Budget last night. Defined by the coronavirus pandemic, here's the details on the winners and losers.

Winner

TaxPayers
The Government has announced that it will bring forward changes to the personal income tax rates that were due to apply from 1 July 2022, so that these changes now apply from 1 July 2020. The maximum Low-Income Tax Offset (LITO) will be increased from $445 to $700.
$ 0
earn between $45,000 and $90,000
$ 0
if you earn more than $90,000

Personal income tax changes

The Government has announced that it will bring forward changes to the personal income tax rates that were due to apply from 1 July 2022, so that these changes now apply from 1 July 2020 (i.e., from the 2021 income year).

Rate

Resident tax rates for the 2018-19 & 2019–20 FY

Resident tax rates for the 2020-21 to 2023-24 FY

0%

$0 – $18,200

$0 – $18,200

19%

$18,201 – $37,000

$18,201 – $45,000

32.5%

$37,001 – $90,000

$45,001 – $120,000

37%

$90,001 to $180,000

$120,001 to $180,000

45%

$180,001 +

$180,001 +


Low income tax offset

The government has also
announced an increase in the Low-Income Tax Offset (LITO) from $445 to $700. If
your taxable income is less than $66,667, you will get the low income tax
offset.

  • The maximum tax offset of $700 applies if your taxable income is $45,000 or
    less.
  • This amount is reduced by 5 cents for taxable incomes between $37,500 and
    $45,000.
  • The LITO will be reduced by 1.5 cents for each dollar over $45,000 to $66,667.

Winner

Businesses
The Government has announced that it will expand the concessions available to Medium Sized Entities to provide access to up to ten Small Business Concessions.
$ 5 m
The aggregate annual turnover of a Medium Sized Entity

For this purpose, a Medium Sized Entity is an entity with an aggregated annual turnover of at least $10 million and (less than) $50 million.

 

The expanded concessions will apply in three phases, as follows:

  1. From 1 July 2020, eligible businesses will be able to immediately deduct certain start-up expenses and certain prepaid
  2. From 1 April 2021, eligible businesses will be exempt from FBT on car parking and multiple work-related portable electronic devices, such as phones or laptops, provided to
  3. From 1 July 2021:
    • Eligible businesses will be able to access the simplified trading stock rules, remit pay as you go (PAYG) instalments based on GDP adjusted notional tax and settle excise duty and excise-equivalent customs duty monthly on eligible
    • Eligible businesses will generally have a two-year amendment period apply to income tax assessments for income years starting from 1 July
    • The Commissioner of Taxation’s power to create a simplified accounting method determination for GST purposes will be expanded to apply to businesses below the $50 million aggregated annual turnover

Other concessions on the table include:


Tax-free business support grants

The Government has announced that the Victorian Government’s Business Support Grants for small and medium businesses, as announced on 13 September 2020, are non-assessable, nonexempt income for tax purposes. The Government may extend this arrangement to similar future grants from all States and Territories on an application basis. Eligibility for this treatment will be limited to grants announced on or after 13 September 2020 and for payments made between 13 September 2020 and 30 June 2021.


Uncapped immediate write-off for depreciable assets

The Government has announced it will introduce the following changes to the Capital Allowance provisions:

  • Businesses with an aggregated annual turnover of less than $5 billion will be able to claim an immediate deduction (what the Budget terms as ‘full expensing’) for the full (uncapped) cost of an eligible depreciable asset, in the year the asset is first used or is installed ready for use, where the following requirements are satisfied:
    • The asset was acquired from 7:30pm AEDT on 6 October 2020 (i.e., Budget night).
    • The asset was first used or installed ready for use by 30 June
    • The asset is a new depreciable asset or is the cost of an improvement to an existing eligible asset, unless the taxpayer qualifies as a small or medium sized business (i.e., for these purposes, a business with an aggregated annual turnover of less than $50 million), in which case the asset can be second-hand.
  • As is currently legislated, businesses with aggregated annual turnover between $50 million and $500 million can still deduct the cost of eligible second-hand assets costing less than

$150,000 that are purchased from 2 April 2019 and first used or installed ready for use between 12 March 2020 and 31 December 2020 under the enhanced instant asset write-off.

The Government has announced that it will extend the period in which such assets must first be used or installed ready for use by 6 months, until 30 June 2021.

  • Small businesses (i.e., with aggregated annual turnover of less than $10 million) can deduct the balance of their simplified depreciation pool at the end of the income year while full expensing applies (i.e., up to 30 June 2022).

Furthermore, the provisions which prevent small businesses from re-entering the simplified depreciation regime for five years if they opt-out will continue to be suspended.

Temporary loss carry back for eligible companies

The Government has announced that it will introduce measures to allow companies with a turnover of less than $5 billion to carry back losses from the 2020, 2021 or 2022 income years to offset previously taxed profits made in or after the 2019 income year.

This will allow such companies to generate a refundable tax offset in the year in which the loss is made. The tax refund is limited by requiring that the amount carried back is not more than the earlier taxed profits and that the carry back does not generate a franking account deficit.

The tax refund will be available on election by eligible companies when they lodge their tax returns for the 2021 and 2022 income years. Note that, companies that do not elect to carry back losses under this measure can still carry losses forward as normal.

FBT changes for reskilling employees

From 2 October 2020, the Government will introduce an FBT exemption for retraining and reskilling benefits provided by an employer to redundant, or soon to be redundant, employees, where the benefits may not be related to their current employment (e.g., where an employer retrains a sales assistant in web design in order to redeploy them to an online marketing role in the business).

This measure is designed to encourage employers to assist redundant workers to transition to new employment opportunities within or outside an employer’s business (e.g., to prepare such employees for their next career), without triggering an FBT liability.

Currently, FBT is payable if an employer provides training to redundant, or soon to be redundant, employees and that training does not have a sufficient connection to their current employment.


The FBT exemption will not extend to retraining acquired by way of a salary packaging arrangement. It will also not be available for Commonwealth supported places at universities (which already receive a benefit) or extend to repayments towards Commonwealth student loans.

The Government will also consult on allowing an individual to claim a tax deduction for education and training expenses they incur themselves, where the expense is not related to their current employment (e.g., where the expense relates to future employment).

Loser

The Economy
Australia's economy has taken its biggest hit since the end of World War II as a result of Covid-19.

Australia’s economy has taken its biggest hit since the end of World War II as a result of Covid-19.

 

With a predicted budget deficit of $213.7 billion, our net debt is now expected to reach $703 billion this year and peak at a record $966 billion by June 2024.

 

A reminder that before the pandemic, the Government did forecast there would be a $5 billion surplus for the 2019-20 financial year….

Winner

Young Australians
The Government will introduce a JobMaker Hiring Credit to incentivise businesses to take on additional young job seekers.
$ 0
a week per eligible employee between the age of 16-29

From 7 October 2020, eligible employers will be able to claim $200 a week for each additional eligible employee they hire aged 16 to 29 years old and $100 a week for each additional eligible employee aged 30 to 35 years old. New jobs created until 6 October 2021 will attract the credit for up to 12 months from the date the new position is created.

 

The JobMaker Hiring Credit will be claimed quarterly in arrears by the employer from the ATO from 1 February 2021. Employers will need to report quarterly that they meet the eligibility criteria.

 

The amount of the credit is capped at $10,400 for each additional new position created. Furthermore, the total credit claimed by an employer cannot exceed the amount of the increase in payroll for the reporting period in question (see employer eligibility requirements below).

Winner

Construction
The Government is investing in several initiatives to in a bid to create jobs and increase cashflows right now.
$ 0 m
in cash grants for people to renovate or build new homes

The Government’s also investing $14 billion in new and fast-tracked infrastructure projects. That includes bringing forward $7.5 billion of spending on road and rail projects, a new $2 billion investment in road safety upgrades and $1 billion for local councils to upgrade roads, footpaths and street lighting.

 

Builders will also benefit from extra support for first home buyers to encourage them to buy new houses and stimulate construction.

Loser

Women
Despite unveiling the new Women's Economic Security Statement in the budget, there still isn't a lot to help women struggling amid the pandemic right now.

None of what was announced yesterday offers immediate assistance for women looking for work now, with much of the other assistance going to male-dominated industries like construction.


$240 million of the funding measures for the next four years will focus on increasing jobs for women in male-dominated industries like construction, more co-funded grants for women-founded start-ups, a focus on encouraging girls and women to pursue careers in STEM and money to tackle sexual harassment in workplaces.

Winner

Superannuation
The Government will provide $159.6 million over four years from 2020/21 to implement reforms to improve outcomes for superannuation fund members.
$ 0 m
implement reforms to improve outcomes for superannuation over the next four years

Currently, structural flaws in the superannuation system mean that unnecessary fees and insurance premiums are paid on multiple accounts, members pay too much in super fees, underperforming products are costing members in lost retirement savings, and there is inadequate transparency on how funds are spending members’ money.

From 1 July 2021, the proposed reforms will make the system better for members in four key ways:

  • Your superannuation follows you – An existing superannuation account will be ‘stapled’ to a member to avoid the creation of a new account when that person changes their
  • Empowering members – A new, interactive, online YourSuper comparison tool will help members decide which super product best meets their
  • Holding funds to account for underperformance MySuper products will be subject to an annual performance test. Funds that underperform will need to inform their members. Funds that fail two consecutive underperformance tests will not be permitted to receive new members unless their performance improves. By 1 July 2022, annual performance tests will be extended to other superannuation
  • Increased accountability and transparency – The Government will strengthen obligations on superannuation trustees to ensure their actions are consistent with members’ retirement savings being For example, trustees will be required to comply with a new duty to act in the best financial interests of members.

Winner

Older Australians and Carers
A range of welfare recipients, including pensioners and disability carers, will receive two cash payments of $250 in December and March.
$ 0
two cash payments in December and March

Older Australians will also benefit from a $1.6 billion spend over the next four years to introduce 23,000 additional home care packages, giving people the option to keep living at home.

 

A targeted exemption will apply from 1 July 2021 for ‘granny flat arrangements’ that will allow older Australians or people with disabilities to create, vary or terminate of a formal written granny flat arrangements where CGT will not apply.

Loser

Climate
The budget doesn't include any further clarity about when the Government thinks Australia will achieve net zero carbon emissions.

Despite including the previously announced funding for renewable energy support agencies Australian Renewable Energy Agency (ARENA) and Clean Energy Finance Corporation (CEFC),  the budget didn’t include any funding for renewables like wind and solar. 

 

The government considers them to be “mature technologies” and successful enough to no longer need Government support.

Winner

Manufacturing
The Government is tipping $1.3 billion towards boosting our manufacturing sector and securing supply lines.
$ 0 b
to boost our manufacturing industry

It’s going to focus on six key areas — defence, space, medicine and medical products, food and beverages, resources technology and recycling and clean energy.

 

 

Not only is it hoped that this will create jobs across the country and help the economy recover from the pandemic, it’s also hoped it will move Australia towards being more self sufficient should we be faced with future pandemics or disasters