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Budget 2020-21 handed down

Federal Treasurer Josh Frydenberg has presented a range of tax cuts and new spending initiatives, including those for small businesses, in the 2020-21 budget.

The budget was initially expected in May (and to focus on removing the deficit), but this was postponed once COVID-19 hit Australian shores and refocused to support economic growth and help bring back jobs for the millions of Australians who are estimated to have lost them.

Indeed, instead of a surplus, the budget will see a record deficit of $213 billion this year, $112 billion next year and $87 billion the year after that.

Several measures impacting home buyers and small businesses have been announced – as part of the government’s plan to “recover from the COVID-19 recession and to build our economy for the future”.

Referring to the budget earlier this week, Prime Minister Scott Morrison said he hoped it would “cushion the blow of the pandemic recession” and “recover what’s been lost – the jobs, the livelihoods, the hours, the incomes, the customers, the clients”.

He said the budget will also look to “take new ground by rebuilding our economy for the future.”

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As well as previously announced initiatives – such as the JobMaker Business Digital Plan – the budget includes a raft of tax cuts (reportedly covering more than 11 million Australians and backdated to the beginning of this financial year) and new cash payments for those on welfare, including up to $500 cash payments ($250 paid in December and $250 paid in March 2021) for those on the age or disability support pensions, carer payments/allowances and family tax benefit, among other welfare schemes.

From 1 July 2020:

  • the low-income tax offset will increase from $445 to $700;
  • the top threshold of the 19 per cent tax bracket will increase from $37,000 to $45,000; and
  • the top threshold of the 32.5 per cent tax bracket will increase from $90,000 to $120,000.

The government will also provide additional targeted support to low- and middle-income Australians. In 2020-21, low- and middle-income earners will receive a one-off additional benefit of up to $1,080 from the low- and middle-income tax offset (LMITO).

The government also outlined that it will invest an additional $14 billion in new and accelerated investment plans, including more than $7 billion in national transport infrastructure to “boost the national economy, deliver safer roads and create thousands of jobs as part of the federal Coalition’s COVID-19 economic recovery plan”.

When it comes to property, several new initiatives were confirmed.

FHLDS extended 

The government has extended the First Home Loan Deposit Scheme (FHLDS) to provide an additional 10,000 places under the scheme until 30 June 2021. 

From 6 October, 10,000 more places will be provided to support the purchase of a new home or a newly built home.

The popular scheme, which first launched at the beginning of the year and saw very fast take-up, has so far seen nearly 20,000 first home buyers purchase a home with a deposit as low as 5 per cent. 

Under the scheme, the government guarantees the difference between the borrower’s 5 per cent deposit and the standard 20 per cent deposit required to take out a home loan without paying lender’s mortgage insurance.

The places for 2020-21 were fully reserved last month.

As such, an extra 10,000 spaces have now been made available.

The National Housing Finance and Investment Corporation (NHFIC) has said it will announce further details later this week.

Mr Frydenberg commented: “Building on the success of the existing scheme, an additional 10,000 first home buyers will be able to obtain a loan to build a new home or purchase a newly built home with a deposit of as little as 5 per cent.

“The additional guarantees will be available until 30 June 2021 and will drive more construction and support jobs as part of our economic recovery plan."

The government said it will also be enabling an additional $1 billion of low-cost finance to support the construction of affordable housing.

This takes the total concessional finance that has been made available to community housing providers to $3 billion. 

Mr Frydenberg said it was also investing $150 million in the Indigenous Home Ownership Program to “construct new homes in regional areas, creating more jobs and helping hundreds of indigenous families buy their own home.”

The $150 million will be provided over three years to Indigenous Business Australia for new housing construction loans in regional Australia.

Removing CGT for granny flats

The government has also committed to a targeted capital gains tax (CGT) exemption for granny flat arrangements where there is a formal written agreement in place.

As tax consequences can be an impediment to families creating formal and legally enforceable granny flat arrangements, the government has said that the new measure will remove CGT to the creation, variation or termination of a formal written granny flat arrangement providing accommodation for older Australians or people with disabilities. 

It is hoped that the measure will also reduce the risk of financial abuse and exploitation while also boosting the construction industry, stimulating demand for new housing and supporting jobs.

This change will not apply to commercial rental arrangements.

It is estimated that there are around 3.9 million pensioners and around 4 million Australians with a disability who would be eligible for this exemption under this change.

The measure would start from 1 July 2021, subject to the passing of legislation.

Business write-offs for most businesses

The budget also looks at supporting new investment and increasing business cash flow, including by providing a temporary tax incentive, which will be available to around 3.5 million businesses (over 99 per cent of businesses) that employ around 11.5 million workers.

The incentive will apply to around $200-billion worth of investment, including 80 per cent of investment in depreciable assets by non-mining businesses.

From 7:30pm (AEDT) on 6 October 2020 until 30 June 2022, businesses with 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. The cost of improvements to existing eligible depreciable assets made during this period can also be fully deducted.

The government will also allow companies with turnover up to $5 billion to offset losses against previous profits on which tax has been paid to generate a refund. Loss carry-back will be available to around 1 million companies that employ up to 8.8 million workers. Losses incurred up to 2021‑22 can be carried back against profits made in or after 2018‑19. Eligible companies may elect to receive a tax refund when they lodge their 2020‑21 and 2021‑22 tax returns.

Mr Frydenberg said: “Building on the successful expansion of the instant asset write-off during the COVID crisis, tonight we go further, announcing the largest set of investment incentives any Australian government has ever provided.

“From tonight, over 99 per cent of businesses will be able to write off the full value of any eligible asset they purchase for their business. This will be available for small, medium and larger businesses with a turnover of up to $5 billion until June 2022.

“It is a game changer. It will unlock investment. It will dramatically expand the productive capacity of the nation and create tens of thousands of jobs.

“A trucking company will be able to upgrade its fleet, a farmer will be able to purchase a new harvester and a food manufacturing business will be able to expand its production line.

“This will boost the order books of the nation. Small businesses will buy, sell, deliver, install and service these purchases.

“Every sector of our economy, every corner of our country, will benefit.

“This is how we will get Australians back to work.”

The government is also providing $105 million in tax relief to expand access to a range of small-business tax concessions by lifting the aggregated annual turnover threshold for these concessions.

Businesses with an aggregated annual turnover between $10 million and $50 million will be able to access up to 10 small-business tax concessions.

The expanded concessions will apply in three phases, with the first phase starting from 1 July 2020. The changes will reduce red tape and support around 20,000 businesses to attract workers and retain jobs.

JobMaker hiring credit 

The government is also looking to support job creation through a new JobMaker hiring credit by giving businesses incentives to take on additional employees that are young jobseekers aged 16 to 35 years old. The JobMaker hiring credit is a key part of the government’s JobMaker plan to boost Australia’s economic recovery.

The JobMaker hiring credit is estimated to support around 450,000 positions for young people and cost $4 billion from 2020-21 to 2022‑23.

From 7 October 2020, eligible employers will be able to claim $200 a week for each additional eligible employee they hire aged 16 to 29 years old, and $100 a week for each additional eligible employee aged 30 to 35 years old. New jobs created until 6 October 2021 will attract the JobMaker hiring credit for up to 12 months from the date the new position is created.

To be eligible, the employee must have received the JobSeeker payment, Youth Allowance (other), or Parenting Payment for at least one of the previous three months at the time of hiring.

The full budget 2020-21 document of measures can be read here.

Budget 2020-21 handed down
Budget 2020-21 handed down
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