Federal Budget Overview

Given the significance and importance of the Federal Budget handed down on Tuesday it is important to understand its details and implications for individuals and businesses.

If you've never followed the Federal Budget before, now might be a good time to take note. The one handed down on Tuesday is being broadcast as one of the most important Government packages in 75 years. Not everyone gets excited about underlying cash balances and fiscal strategies, but given the once-in-90-years recession and once-in-100-years pandemic we find ourselves in, this budget is particularly relevant to your everyday life and everyday business.

What should I look for?; Where can I find it?; and What’s in it for me?
If you're interested in taking a deeper dive, the Budget comes in several volumes, or "budget papers", printed over hundreds of pages, or a budget overview can be found at:

https://budget.gov.au/2020-21/content/overview.htm#two

Some of important aspects of the budget to be aware of for individuals and businesses are:

Individuals:
  • Individual tax cuts will be brought forward and back dated to 1 July 2020. Lower and middle income earners will receive tax relief of up to $2745 for singles and up to $5490 for dual income families due to personal income tax cuts scheduled for 2022 being brought forward.
  • A Women in Science, Technology, Engineering and Mathematics (STEM) Industry Cadetship program will be created to support 500 women to complete an advanced diploma through study and work-integrated learning experiences.
  • People who relocate to rural areas for seasonal work (even if for only 6 six weeks) can claim a relocation reimbursement of $6000.
Businesses:
  • For the individual tax cuts brought forward and back dated to 1 July 2020, as an employer you don't need to do anything. Once the ATO have recalculated the PAYG Withholding rates all major accounting softwares (e.g. Xero, MYOB, Quickbooks, etc.) will update their payroll systems immediately and the new tax rates will automatically become effective on payrolls processed after the change.
  • Businesses will be offered a 50% wage subsidy for every apprentice they hire starting from October 5 however, this is only for one year out of the 4 years required for an apprenticeship - to a maximum of $7000 per quarter.
  • The wage subsidy is available for apprentices and trainees studying towards a Certificate II or higher qualification, in an approved training contract.
  • Businesses will have more incentives to hire workers under the age of 35, due to 12-month wage subsidies of up to $200 per week, viz:
1. For those that hire someone under 30, a JobMaker hiring credit will be paid for up to 12 months at the rate of $200 a week; and
2. For those who hire some between 30 – 35 years old a $100 a week credit will be available This is limited to 100,000 places (first in, first served).
3. However, in order for businesses to access the credit, new employees must work for at least 20 hours a week, and must have been receiving JobSeeker Payment, Youth Allowance (Other) or Parenting Payment for at least one of the previous three months at the time of hiring.

  • Businesses with a turnover of up to $5 billion – will be able to write off the value of an eligible asset they purchase for their business until June 2022. The cost of improvement to existing assets can also be included.
  • Businesses with a turnover of less than $5 million will be able offset losses against tax paid on prior profits, companies that have reported a loss due to the pandemic will be able to claim a tax refund through a loss carryback scheme.
  • The fringe benefit tax will be removed for employer-provided retraining and reskilling of employees who are redeployed to a different role in the business.
  • Australian Farmers will be eligible for a share of $2 billion in concessional loans to help them overcome the impacts of the drought.
  • Billions will be spent upgrading the nation’s water infrastructure, including $2 billion for dams, weirs and pipelines.
  • Farmers will be able to access $50m in rebates for putting in bores and dams.
  • Businesses with a turnover between $10 million and $50 million will have access to a range of tax concessions typically only available to smaller businesses.
  • State Government COVID-19 grants along with the Commonwealth Cash Flow Boost payment will be treated as Non-Assessable non-exempt income. (i.e. you will not pay tax on grant income)

Finally, the government will also invest $328.4 million over four years to make it easier for Australian farmers to take goods to market by reducing regulatory congestion, $28.6 million to look at ways to simplify and modernise Australia's trade system to build the foundations of a long awaited single trade window, a pilot program for streamlining services from Australian Border Force and the Department of Agriculture, Water and the Environment, and an extension of the Australian Trusted Trader program to defer customs and anti-dumping duties from 1 July 2021.

What is the Federal Budget?
Every year the Government spends hundreds of billions of dollars to keep itself, and the country running. This money ranges from welfare payments and support, like JobSeeker and Youth Allowance, to Government-managed programs and the funding of Medicare, schools, the military and new projects like roads and infrastructure.

The Federal Government has to account for that money somehow and every 12 months or so the Government has to allocate the money it collects into spending programs, and determine the rate at which it will collect revenue via taxes. It does that in the Federal Budget. The Budget is often the platform through which major policy changes, like tax cuts and new initiatives, are announced.

It also includes an economic outlook — a detailed analysis of the overall spending and income of the Government, showing whether the Budget is in deficit (it spent more than it collected) or surplus (it collected more than it spent). The deficit or surplus has an impact on Australia's debt, which is the total amount of money the Government owes to creditors.

The Budget doesn't just outline the financial year it's produced for, it also forecasts the coming four years of spending and revenue.

Why is it important?
The Budget provides a chance for the Government to set out its priorities and explain how it wants to achieve them. Changes that affect you and your business, like new taxes, payments and government concessions are often announced in budgets.

But the Budget doesn't just affect individuals, it affects businesses and industries. It gives the Government a chance to influence the entire economy by changing its policies. Ultimately, if you've paid any taxes, levies or fees to the Federal Government, it's your chance to see where your money will go. Similarly, if you've received any benefit or support payment, it's your chance to see whether those will be affected.

When is the Budget handed down?
The Federal Budget is usually handed down on the second Tuesday in May, but this year it is the first Tuesday in October, as May was still a very uncertain time given the COVID-19 pandemic. Most of the world would have had trouble forecasting what would happen in the next fortnight, let alone over the forward estimates period, which is a way of saying the next four financial years.

Because of that, the Government delayed the full Federal Budget to allow the global situation to stabilise, even if only a bit. There was an earlier update on the nation's finances in July, which revealed the biggest budget deficit in modern Australian history. That was before the Victorian outbreak put further pressure on the economy, and increased demand for support like JobKeeper, meaning the numbers revealed in the full budget are likely to be even worse.

Please consult with your accountant or financial advisor as required for advice on how to access and implement the aspects of the budget that impact you and your business.