The Coalition government has released its budget for 2019-20, which includes a range of initiatives for SMEs, as well as revealing a surplus of $7.1 billion.
The budget 2019-20 – which sets out what the government will spend over the coming years should it be re-elected after the federal election next month – was released on Tuesday (2 April) evening.
Treasurer Josh Frydenberg announced that the Coalition government had delivered on its promise to bring the budget into surplus this budget year “after more than a decade of budget deficits”.
This budget year 2019-20 will reportedly see a surplus of $7.1 billion, equal to 0.4 per cent of GDP.
The government said that it would also look to reduce the nation’s debt to zero by 2029-30.
“The government’s continued focus on spending restraint has ensured that surpluses are being delivered while at the same time providing lower taxes for hard-working Australians and guaranteeing the essential services Australians rely on,” the budget reads.
“The government is reducing debt, not through higher taxes, but by good budget management and growing the economy,” it says.
Some of the biggest calling cards in this budget are, in fact, tax cuts and relief packages.
Tax cuts to help lower- and middle-income taxpayers
Among the major initiatives are structural reforms to the tax system.
The Treasurer announced two changes in the budget that will reportedly deliver $158 billion of additional tax relief and are said to be “the largest personal income tax cuts since the Howard government”.
According to the Treasurer, more than 10 million taxpayers will benefit from a non-refundable low and middle-income tax offset (LMITO).
Taxpayers earning up to $126,000 a year will see tax relief of up to $1,080 per individual, or $2,160 for dual income families.
Under the changes, the reduction in tax provided by LMITO will increase from a maximum amount of $530 to $1,080 per annum and the base amount will increase from $200 to $255 per annum for the 2018-19, 2019-20, 2020-21 and 2021-22 income years.
It will therefore provide a reduction in tax of up to $255 for taxpayers with a taxable income of $37,000 or less, while those with taxable incomes of $37,000 and $48,000 will see the value of the offset increase at a rate of 7.5 cents per dollar (to the maximum offset of $1,080).
For those with taxable incomes of $90,000 to $126,000, the offset will phase out at a rate of 3 cents per dollar.
“This is money that could go towards your monthly mortgage payment, your quarterly power bill or your yearly car insurance,” Treasurer Frydenberg said.
“This relief will flow quickly and be available to Australians after tax returns for the 2018-19 year are submitted in 13 weeks’ time,” he added.
The second change will see the government lower the 32.5 per cent tax rate to 30 per cent from 1 July 2024, “more closely aligning the middle tax bracket with corporate tax rates, improving incentives for working Australians and increasing the reward for effort”.
It will cover all taxpayers earning between $45,000 and $200,000 and will reportedly see 13.3 million taxpayers have “permanently lower taxes in 2024-25”.
SME instant asset write-off
Following on from its announcement in January this year that it would increase the instant asset write-off threshold from $20,000 to $25,000 and extend it out to 30 June 2020, the Coalition government has now said it will immediately increase the instant asset write-off to $30,000.
From 7:30pm today (2 April), both small businesses (those with aggregated annual turnover of less than $10 million) and medium-sized businesses (with aggregated annual turnover of $10 million or more but less than $50 million) will have access to the instant asset write-off, which applies on a per asset basis.
This means that these businesses will be able to immediately deduct purchases of eligible assets costing less than $30,000 that are first used or installed ready for use.
It will reportedly cover an additional 22,000 businesses, employing 1.7 million Australians.
Mr Frydenberg said: “We want small businesses to prosper, and we are backing them to do so.”
“[F]rom tonight, the instant asset write-off will be increased and expanded.
“It will be increased from $25,000 to $30,000, and it can be used every time an asset under that amount is purchased – allowing a café to get a new fridge or grill, a plumber to buy new tools or a courier a new van.”
He continued: “Already, more than 350,000 businesses have taken up the instant asset write-off. And now, even more will have the chance to do so.”
As announced in February, the government has allocated $57.5 million over five years (from 2018-19) to the Department of Jobs and Small Business, the Administrative Appeals Tribunal and the Australian Taxation Office (ATO) to provide access to a “fast, low-cost, independent review mechanism for small businesses in dispute with the ATO”.
Housing and social housing measures aren’t a major focus of the budget this year, but the government has committed to $1.7 billion to support state affordable housing services, the vast majority ($1.56 billion) will be for the National Housing and Homelessness Agreement (NHHA) that helps improve access to “affordable, safe and sustainable housing across the housing spectrum, including to prevent and address homelessness, and to support social and economic participation”.
An additional $114.9 million will go to National Partnerships in 2019-20 to support state affordable housing services, with $110 million for housing for Indigenous Australians in remote communities, particularly in the Northern Territory.
This will help address overcrowding, homelessness, poor housing conditions and severe housing shortages.
The remaining money for National Partnerships will be allocated to states provide funding to state governments to trial social impact investments, which aim to assist vulnerable priority groups as well as those that help young people at risk of homelessness.
The government has also earmarked $30 million to provide over 100 new social housing dwellings in Greater Hobart in partnership with community housing providers and allotted $37.5 million this year to South Australia to assist with costs associated with the provision of remote housing.
Mr Frydenberg said: “Affordable housing is also a priority for this government.
“Just over a week ago, the National Housing Finance and Investment Corporation, established by this government, successfully issued the largest social bond in Australia’s history.
“Over $300 million was raised, providing a significant injection into the community housing sector.”
Other notable highlights of the budget include:
- Spending $606.7 million over five years (from 2018-19) to “facilitate the government’s response” to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry – largely for resourcing the Australian Securities and Investments Commission and the Australian Prudential Regulation Authority
- Providing $725 million for aged care services, housing and financial support
- Providing $300 billion to all schools (a total increase of 63 per cent)
- Setting aside a $100 billion of fund for the government’s infrastructure plan over the next decade
- Earmarking $80 billion in healthcare initiatives
- Funding $9 billion in science, research and technology projects
- Providing $6.3 billion in drought support and $3.3 billion for those affected by flooding
- The creation of 80,000 new apprenticeships in industries with skills shortages
- Spending $500 million for a Royal Commission into the Mistreatment of People with Disability.
Find out more about the budget 2019-20 in Mortgage Business’ special Budget Bulletin tomorrow (3 April), which will be released following the usual Mortgage Business news bulletin.
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Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.