A Summary of the 2020-21 Federal Budget

Federal Budget 2020: What it means for you

Treasurer Josh Frydenberg promised that the budget would largely surround employment, which proved to be correct with the main theme of this year’s budget being jobs and investment and the necessary steps Australia must take on the long road to economic recovery.

Another large focus for the government is tax reforms, including the already announced changes to fringe benefits tax and capital gains tax, and bringing forward personal income tax cuts.

Albeit an anticipated Budget deficit in 2020-21 of $214 billion with further deficits imminent, Tuesday’s budget assumes the Australian economy will contract by 3.75% in 2020 before rebounding strongly off the low base to grow by 4.25% in 2021 – a rate of growth double pre-crisis levels and faster than growth recorded at the height of the mining boom.

As well as the upbeat growth assumption, the Treasury also assumes the best-case scenario for the pandemic. It assumes an effective vaccine for COVID-19 will be available next year, that internal borders reopen, and international students and migrants return in the latter half of 2021.

A Summary of the 2020 Federal Budget

Stage 2 personal income tax cuts to be brought forward from 1 July 2022 to 1 July 2020
Businesses with turnover of less than $5 billion can write off the full value of eligible assets used or installed by 30 June 2022
Companies with turnover of less than $5 billion can carry back losses incurred in the 2019-20 to 2021-22 years
New JobMaker Hiring Credit measure to encourage employers to hire young workers
Proposed Research & Development amendments refined and deferred to 1 July 2022
Government to invest additional $14 billion in new and accelerated infrastructure projects over the next four years
Record funding for hospitals, schools, childcare, aged care and disability services
100,000 new apprenticeships and $1 billion in university research funding
Aged care funding up $2.2 billion, including $1.6 billion for 23,000 additional home care packages.

Economy

Budget deficit of $213.7 billion in 2020/21
Deficit narrows to $112 billion in 2021/22, $87.9 billion in 2022/23 and $66.9 billion in 2023/24
Commonwealth net debt to rise to $703.2 billion in 2020/21 before hitting $966.2 billion in 2023/24
Economic growth to fall by 1.5 per cent in 2020/21 before expanding by 4.75 per cent in 2021/22
Unemployment rate of 7.25 per cent in 2020/21, before falling to 6.5 per cent the following year
Inflation as measured by CPI to be 1.75 per cent in 2020/21

Taxation

Under the Government’s changes, individuals will benefit from bringing forward the tax cuts in Stage 2 of its Plan, as well as a one-off additional benefit from the low- and middle-income tax offset in 2020-21.

Extra $12.5 billion in personal income tax relief over the next 12 months
In 2020/21, low and middle income earners will get tax relief of up to $2,745 for singles and up to $5,490 for dual income families
When the plan is fully rolled out in 2024/25 around 95 per cent of taxpayers will have a marginal tax rate of 30 per cent or less
A $2 billion research and development tax incentive to apply from July 1, 2021

Business

From budget night to June 20, 2022, businesses with a turnover up to $5 billion will be able to deduct the full cost of eligible depreciable assets of any value in the year they are installed.
Loss ’carry-back’ will also be available to around one million companies, with losses incurred up to 2021/22 carried back against profits made in or after 2018/19.
Small and medium businesses will also be able to apply “full expensing” to second-hand assets; businesses earning $50m to $500m will be able to do so for assets of less than $150,000.
Exempting from the 47% fringe benefits tax employer-provided retraining activities to employees who are redeployed to a different role in the business.
$4.5bn investment in NBN Co and $29.2m to accelerate the rollout of the 5G network.
Changes to fringe benefits tax
Small and medium businesses can access up to 10 tax concessions

Jobs

JobMaker hiring credit to support around 450,000 people aged between 16 and 35 get into work, at a cost to the budget of $4 billion
The credit of up to $200 a week will be available to employers for each new job they create over the next 12 months
$1 billion JobTrainer fund will support up to 340,700 free or low-fee training places
$1.2 billion to subsidise apprentice wages
$240.4 million package to deliver job opportunities, support parents and increase participation in STEM industries

Welfare

The government has announced two additional economic support payments of $250 to pensioners and other eligible recipients, worth $2.6bn.
Extension of the jobkeeper payment support for a further six months until 28 March 2021.
Extension of the coronavirus supplement until 31 December 2020 at a rate of $250 per fortnight from 25 September 2020.
The budget doesn’t provide any clarity about the future of jobseeker payment rates after Christmas.

Education

$1bn will be injected into Australia’s university research sector.
Funding for 50,000 online short courses to upskill workers and unemployed Australians in teaching, health, science, information technology and agriculture.
$299m to provide an additional 12,000 undergraduate university places in 2021.

Housing

An extra 10,000 places in 2020/21 under the First Home Loan Deposit Scheme to buy a new home or newly-built home
These first home buyers can secure a loan with a deposit of as little as five per cent, with the government guaranteeing up to 15 per cent of a loan
$1 billion increase in the government guarantee to the National Housing Finance and Investment Corporation to support more affordable housing

Infrastructure

$14bn in new and accelerated infrastructure projects over the next four years in every state and territory, including Melbourne to Brisbane inland rail and Western Sydney international (Nancy-Bird Walton) airport
$3bn towards shovel-ready projects to support further job creation and economic recovery, including for small scale road safety projects.

The Bush

$328 million to help agricultural exporters and the recovery from drought, bushfires and COVID-19
Digital platforms to make it easier for exporters to access overseas markets
$550 million regional package to support tourism, rural health workforce, manufacturing and technology

Health

$4.9 billion in health measures to deal with the coronavirus pandemic, including support for hospitals, protective equipment and vaccines and treatments
$750m in funding for Covid-19 testing and $171m for the extended operation of up to 150 dedicated respiratory clinics to manage and diagnose Covid-19 cases.
$112 million to continue Medicare-funded telehealth
Extra $746.3 million to support senior Australians in aged care, workers and providers to respond to the pandemic
23,000 new packages for older Australians waiting to receive at home care, at a cost of $1.6bn.
$798.8m for the National Disability Insurance Agency and NDIS Quality and Safeguards Commission.
A targeted capital gains tax exemption for granny flat arrangements where there is a formal written agreement, applying to arrangements with older Australians or those with a disability.

Environment

The Morrison government’s environment and energy budgets consist largely of pre-announced items, including funding for its technology roadmap for reducing Australia’s emissions and $52m for the expansion of Australia’s gas industry.
The government is spending $50m on carbon capture and storage to fund pilot projects it claims will “dramatically cut” emissions from industrial facilities and there is $70.4m over five years for a regional hydrogen export hub.
$249.6 million over four years to modernise recycling infrastructure, reduce waste and recycle more
$47.4 million ocean health package
$29.1 million to clean up contaminated land

Superannuation

Australians will automatically keep their superannuation fund when they change employers, stopping the creation of unintended multiple accounts.
A new online YourSuper comparison tool will help people compare the performance of funds which will be required to meet an annual performance test.

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