To kickstart the economy, the Federal Government has released huge spending and tax cuts.
- This appears to be a great Budget for the young, anyone still working and business owners. Self-funded retirees received nothing directly – but if the share market improves due to this budget stimulus then they should receive a nice gain over the next 12 months.
- The massive Government spending, tax cuts and wages subsidies should lead to higher spending throughout the economy and greater business investment.
There are a number of key areas we would like to make you aware of.
Personal Tax Cuts
In an attempt to kick start the economy, the Government is introducing tax cuts totalling $50 billion backdated to 1 July 2020.
There are 2 key parts to it. An offset which will get paid in a lump sum after July next year when you lodge your 2021 Tax Return, and an immediate reduction in the tax taken from your wages as soon as this legislation passes Parliament.
In both cases there is nothing you need to do and no extra forms to fill out at tax time – the adjustments will happen automatically.
Here’s what tax cuts you’ll get:
| 2019-2020 | 2020‑21 | ||||||
| Taxable Income | Tax Liability | Tax Liability | Change in Tax | ||||
| ($) | ($) | ($) | ($) | (%) | |||
| 40,000 | 4,467 | 3,887 | ‑580 | ‑12.9 | |||
| 60,000 | 11,067 | 9,987 | ‑1,080 | ‑9.8 | |||
| 80,000 | 18,067 | 16,987 | ‑1,080 | ‑6.0 | |||
| 100,000 | 25,717 | 24,187 | ‑1,530 | ‑5.9 | |||
| 120,000 | 34,117 | 31,687 | ‑2,430 | ‑7.1 | |||
| 140,000 | 42,097 | 39,667 | ‑2,430 | ‑5.8 | |||
| 160,000 | 49,897 | 47,467 | -2,430 | ‑4.9 | |||
| 180,000 | 57,697 | 55,267 | ‑2,430 | ‑4.2 | |||
| 200,000 | 67,097 | 64,667 | ‑2,430 | ‑3.6 |
The average teacher’s wage is around $90,000, so a couple who both teach can expect a tax cut of up to $3,060. That’s massive! The big question is if people will spend these tax cuts or reduce their home mortgages and save them.
$250 Economic Support Payments
A payment of $250 in December 2020 and another payment of $250 in March 2021 will be made to individuals receiving Age or other pensions and health care card holders. These payments will be exempt from tax and will not count as income support for any income support payments.
Superannuation – “Stapling” of Accounts
This is something that really makes sense. Under this measure, an individual’s super account will be “stapled” to them as they change jobs. New super accounts will no longer be automatically created every time someone starts a new job.
Capital Gains Tax removed from “Granny Flats”
Currently, there is a risk of capital gains tax (CGT) applying if you sell your family home and if you have entered into a formal granny flat arrangement with an elderly parent or relative. The Budget has now included a measure where CGT will not apply to this.
Our comprehensive document on the budget is attached.
NEXT STEPS
If you have any questions about how the 2020 Federal Budget affects you – please contact our office.
We look forward to helping you!