Budget 2020: Quick guide to the important budget changes affecting you
Budget 2020 will go down as one of the biggest and most important budgets in history. There is a strong focus on putting money into the economy and no shortage of initiatives to report on. Here we’re extracting the important budget changes most likely to be relevant to you, our clients.
In years past, we’ve seen a tweak here and there as politicians have focused on what they felt would draw the votes – that getting the budget into surplus is a sign of good economic management. The headline forecast for this year’s budget was that we were finally supposed to be in surplus. But surpluses are out the window, with a forecast budget deficit for this financial year of $213 billion.
Government debt is expected to reach $703 billion by the end of financial year, peaking at $966 billion by 2024. This represents 44 percent of our GDP (although we’re reminded that this is modest by global developed standards). Further, headline unemployment is forecast to reach 8 percent by end of this year. This is driven by a modest assumption that it won’t be until 2022 to we see a vaccine and international travel – a key component of our education and tourism industries – to resume.
The economy is weak and the focus of Budget 2020 is on injecting money, rather than massaging the rules. Read on to find out the important budget changes and how they may affect you.
Medical research and mental health
It’s appropriate to kick off with medical research and specifically, COVID-19 vaccines. The government has allocated $1.7 billion to fund vaccines from either Oxford University or the University of Queensland. A $32 million funding increase will go to the Medical Research Future Fund. A $10 million increase is allocated to CSIRO for Australian vaccine research and development.
A doubling of Medicare-covered psychological services will provide much needed financial support for mental health. You can now receive 20 consultations under a Mental Health Plan.
Income tax cuts
The government has confirmed $17.8 billion in tax cuts will be provided to all taxpayers, backdated to July. This is the first time we’ve seen a backdated tax cut that will put billions into workers’ bank accounts.
The tax-free threshold hasn’t changed, however the tax bands have been extended. The 19 percent tax band is extended to earnings up to $45,000. The next tax band of 32.5 percent is extended to earnings up to $120,000.
The previously announced tax cuts to remove one of the tax bands has been omitted until 2024.
Business tax support
Budget 2020 has brought hope to business owners. Key budget changes include instant tax write-offs, using losses to reduce previous tax payments and other job stimulus subsidies. The initiatives combined will cost the government an unprecedented $36.7 million.
The instant asset write-off initiative will allow businesses to fully write off eligible assets at the time of purchase. There is no limit on the size of the tax write off you can make, as long as it’s a legitimate business asset that you would have depreciated under normal circumstances. To qualify, your annual turnover must be less than $5 billion. The asset must be purchased before June 30 2022.
Businesses will also be able to claim a refund if they suffer a tax loss, rather than having to carry forward the loss into the future to offset against profits. So if you made a profit last year and paid tax, you could claim the tax back if you suffer a loss this year. Businesses turning over under $5 million will be eligible.
Job stimulus initiatives
The JobSeeker and JobKeeper packages are confirmed to end in December 2020 and March 2021 respectively.
However, key budget initiatives continue for businesses with new wage subsidies announced. A subsidy will be provided to businesses that employ unemployed workers aged between 16 and 30 of $200 per week. A smaller subsidy will be offered to those who employ workers aged between 30 and 34 of $100 per week. The subsidised worker needs to be working for a minimum of 20 hours per week to qualify.
The government will be subsidising 50 percent of the wages of trainees and apprentices to the tune of $1.2 billion. 10,000 workers are expected to be covered, in an effort to get more people working post COVID-19.
Economic support payments
Further economic support payments are expected to help boost spending across the economy. In November, a $250 bonus will be paid to most people that are entitled to a Centrelink payment such as the Aged Pension, Family Tax Benefit and others. This will be followed up with a further $250 payment in March next year.
First home buyer support
The First Home Buyer Deposit Scheme is offering 10,000 new places to support the purchase of a new home. The scheme allows first home buyers to purchase a home with a deposit as small as 5 percent. The government will also cover the cost of Lenders Mortgage Insurance. Combined this with state government first homebuyer grants and other initiatives, owning a home may become much more affordable.
Paid parental leave changes
To reflect worsening employment conditions, changes to the work test will make it easier to receive government paid parental leave. To qualify, you need to have worked for 10 of the 20 months before giving birth.
But don’t expect any help with childcare once you’ve had your baby. No announcements were made regarding childcare, after a modest flirtation with free childcare earlier this year.
Infrastructure and environment
In addition to tax cuts and job creation, other key budget initiatives include money being splashed around infrastructure.
$4.5 billion is allocated to the National Broadband Network, so 75 percent of fixed-line customers can access the top speed.
$1.9 billion is being invested into future energy technologies, such as hydrogen and carbon capture.
$14 billion is allocated for rail and road upgrades, as well as a further $2 billion on road safety.
$2 billion will go towards upgrading water infrastructure such as dams and pipelines.
A $2 billion loan scheme will be available to help farmers through the drought.
$100 million will be added to the Building Better Regions Fund to help with local infrastructure in regional areas.
Finally, $7.5 billion of previously announced funding is being brought forward to commence projects ahead of schedule.
Seniors and Aged Care
Getting a Home Care Package has been a long and frustrating wait for many. Despite the aging population, the government has been reluctant to increase availability. But as part of this year’s budget, $1.6 billion of additional spending should make 23,000 additional packages available. More seniors can remain home for longer, delaying the need to sell to move into a care facility.