In case you missed it (or have had enough of the news), the Federal Budget for 2020 was handed down on Tuesday night. There was plenty to take in, so we’ve summarised the key takeaways we believe will have the most relevance and interest for you.
Here’s our 5-minute budget breakdown.
Australia’s predicted debt and deficit have ballooned since the July economic update. The nation’s gross debt will hit a peak of $1.1 trillion in June 2024, or 51per cent of GDP.
The deficit is expected to peak at $213 billion this year before reducing rapidly thereafter, estimated to fall to $66.9 billion by 2023-24.
Thankfully, unemployment is not expected to peak as high as previously estimated. It is now forecast to hit 8 per cent in the December quarter.
Tax cuts form one of the major platforms for leading Australia’s $74 billion spending blitz out of the COVID-19 crisis.
Stage two of the government’s tax cuts has been brought forward and will be backdated to July, delivering $17.9 billion worth of instant tax relief to more than 11 million Australians. The biggest winners will be middle-income workers earning between $50,000 to $90,000, who will receive an extra $1080 from the offset.
Overall, by lifting the 19 per cent threshold from $37,000 to $45,000 and the 32.5 per cent threshold from $90,000 to $120,000, low to middle-income earners will be up to $2745 better off this financial year.
Education and training
The government extended its previously announced $1 billion JobTrainer program with 100,000 new apprenticeships and traineeships costing an additional $1.2 billion. Businesses that employ these apprentices or trainees will be offered a 50 per cent wage subsidy by the government.
A ‘back-to-work’ wage subsidy scheme called JobMaker has also been introduced, which is a way of helping business owners employ young workers (under 35) who have been forced onto welfare payments. The government will subsidise firms up to $200 a week of wages for eligible employees.
There was also $326 million provided for 12,000 new domestic university placements to try to help this decimated sector, as well as $251.8 million for universities to provide 50,000 new higher education short courses in agriculture, health, IT, science and teaching.
A $1 billion lifeline has also been made available for universities to fund new research.
Infrastructure and housing
An area of major focus to jumpstart the economy is in infrastructure, where the government will invest $7.5 billion in transport projects and $2 billion in road safety upgrades across all states and territories. That brings the government’s infrastructure commitment to more than $14 billion for new and accelerated projects since the pandemic began.
The government also expects 40,000 jobs to be supported by increasing the Commonwealth’s 10-year infrastructure pipeline.
To stimulate the housing sector and help more first-home buyers crack into the market, the First Home Loan Deposit Scheme has been extended to 2021, creating an extra 10,000 spots for new or newly-built homes. The scheme allows first-home owners to buy with a deposit as low as 5 per cent, with the government acting as guarantor up to 15 per cent.
Health and welfare
Forty-one billion will be spent on dole payments in 2020-21, expected to almost halve to 22 billion a year later. Twelve billion has been committed specifically to pensioners and the unemployed who will receive $500 in bonus payments ($250 in December and $250 in March).
For senior Australian’s, there will be funding for 23,000 new home-care packages to allow them to remain in their home for as long as possible. Aged-care homes will receive $746.3 million to help them manage COVID, including infection control and training for nurses.
Elderly Australian’s with a disability who can’t get access to the NDIS will now get help from a new $125 million program.
And from a mental health perspective, Australians accessing mental health services will get a boost with the number of Medicare supported appointments with a psychologist doubling from 10 to 20.
Businesses with a turnover of up to $5 billion will now be able to write off the full value of any eligible asset that is purchased for the business. It is estimated that 99 percent of Australian businesses will qualify for the initiative.
The ATO will also offer simplified GST accounting methods for businesses with turnovers under $50 million. In addition, those businesses with turnovers between $10 million and $50 million will be able to access up to 10 small business tax concessions.
And to help small business owners in particular who have been decimated by COVID restrictions, businesses will be able to offset losses incurred before June 2022 against profits from 2018-19 and later.
For the many businesses who have had to change how they operate, $800 million will be provided to assist with working online, including $29.2 million to boost early business access to the 5G network.
In a significant boost for farmers and communities still struggling with the effect of drought, the government will provide $155.6 million in support over four years.
Low-emission energy sources and renewable technologies will also benefit from $1.9 billion in funding to address the impacts of climate change.
Other notable environmental measures include a $249 million cash injection for the waste and recycling industry; $233 million allocated to upgrades for Uluru, Kakadu, Christmas Island and Booderee National Parks; and $47.4 million to be spent on ocean health initiatives over four years.
What this all means
The government is determined to stimulate Australia’s economy as quickly as possible, focusing on more money in our pockets for spending and greater capacity and flexibility for business growth.
This does come with a major asterisk sitting above it, as the government’s debt and recovery forecasts are based on a vaccine being available by the end of next year, and that Australia does not experience any more waves of COVID-19.
So this is a best-case budget in other words.
With this in mind, our advice for our clients remains the same. Spend within your means and keep to your savings plan (you might want to put the tax cut towards endeavours such as paying down your mortgage or salary sacrificing). Focus on your goals and revaluate them when necessary. And above all, keep striving to live your Good Life.
Remember, our Tribeca Tribe will be with you every step of the way.