If ever there was a time for a "break glass in case of emergency" budget, this was it.
Coronavirus has put a wrecking ball through the economy, and that means there's never been a more relevant budget for Australians.
Making sense of the detail can be overwhelming, so here are some bite-sized bits of what's in the Budget.
Tax cuts galore
The Budget includes tax cuts for most workers, primarily by bringing forward income tax cuts scheduled for the middle of 2022.
Workers earning between $45,000 and $90,000 might remember their tax returns being about $1,080 healthier in the past few years, due to the low and middle income tax offset (LMITO).
The offset was meant to end when stage two of the Government's tax cuts came into force, and while the Government has decided to bring forward the cuts, it won't ditch the offset, yet.
It will remain for the 2020-21 financial year, letting workers keep an additional $1,080 on top of the tax cut, but will snap back in 2021-22, meaning middle-income earners will pay more tax next year than they will this year.
The stage two changes alter the boundaries of the 32.5 per cent income tax bracket, meaning people will pay 19 cents or less for every dollar earned up to $45,000, then 32.5 per cent on ever dollar earned between that and $120,000.
For someone earning between $45,000 and $90,000 the changes are worth $1,080 (on top of the $1,080 provided under the LMITO).
JobKeeper replacement takes shape
The Budget makes no changes to the March 28 end date of the JobKeeper wage subsidy, but does outline a fresh wage subsidy.
The JobMaker Hiring Credit will partially subsidise the wages of young employees who are hired from tomorrow, but there are some conditions employers and employees will have to meet.
Bosses will be able to claim $200 each week for every employee hired after tomorrow aged between 16 and 29, and $100 each week for every employee aged between 30 and 35.
Employees will also need to:
- Have been on JobSeeker, Youth Allowance or the Parenting Payment for at least one of the past three months
- Begin working at the claiming business between October 7, 2020 and October 6, 2021
- Work an average of at least 20 hours a week over the reporting period
The cost of the scheme will be $4 billion, with Treasurer Josh Frydenberg saying it will target youth unemployment.
"Treasury estimates that this will support around 450,000 jobs for young people," he said in his speech.
The only businesses explicitly excluded from the scheme are the major banks.
More payments coming for pensioners
As part of further support for people not in work, the Government will offer two more tax-free payments of $250 to pensioners and others on government support.
The full list includes people on the:
- Age Pension
- Disability Support Pension
- Carer Payment
- Family Tax Benefit, including Double Orphan Pension (not in receipt of a primary income support payment)
- Carer Allowance (not in receipt of a primary income support payment)
- Pensioner Concession Card holders (not in receipt of a primary income support payment)
- Commonwealth Seniors Health Card holders
- Eligible Veterans' Affairs payment recipients and concession card holders
The payments will roll out in November, followed by a second instalment early next year.
The Budget makes no changes to the overall JobSeeker rate (currently $815 per fortnight) or its scheduled snap back to $550 per fortnight at the end of the year.
The Government wants to get businesses spending
The Government will offer "temporary full expensing" to businesses, to encourage them to invest.
Effectively, businesses that make new investments will be able to write off the entire cost in one year, rather than having the asset depreciate over several years.
The scheme will be available instantly to all businesses with a turnover of less than $5 billion each year.
"Over 99 per cent of businesses will be able to write off the full value of any eligible asset they purchase for their business," Mr Frydenberg said.
Other changes will help businesses to more easily offset their tax losses against past profits
The deficit this year will be big
The deficit for this financial year will dwarf any comparable budget shortfall in history, with the Government spending $213.7 billion more than it will collect.
That comes after the rapid introduction of JobKeeper, JobSeeker and other supports in March blew an $85.3 billion deficit in the 2019-20 Budget.
A string of multi-billion dollar deficits across the coming four financial years will see gross debt reach more than $1 trillion next financial year, with net debt peaking at just under $1 trillion in 2023-24.
The spend underlines the dire economic situation Australia is in, with the Budget painting a grim picture with its key economic indicators.
The Budget estimates the headline unemployment rate will peak at 8 per cent between now and the end of the year.
It is forecast to begin falling after that point, reaching 6 per cent in 2022-23.
The Treasurer has said the Government will not focus on reducing the debt until employment has reached that benchmark.
The Budget also predicts wages growth will remain stagnant, meaning the money you take home in pay is unlikely to rise rapidly in the near future.
Budget relies on big assumptions
The economic assumptions underlying the Budget predict a COVID-19 vaccine will be rolled out to Australians by the end of next year.
The Budget also assumes we won't see any more widespread outbreaks of COVID-19 — and the associated lockdowns — as has been the case in Victoria.
Economic assumptions rely on all state borders being open by Christmas, with the exception of WA.
The Budget assumes WA will lift its border restrictions in April, not long after the state election there.
Assumptions relating to the tourism economy and international travel are somewhat gloomier, with "inbound and outbound travel expected to remain low through the latter part of 2021, after which a gradual recovery in international tourism is also assumed to occur".
Off the back of that, net overseas migration is expected to fall by 72,000 people.
https://news.google.com/__i/rss/rd/articles/CBMiWGh0dHBzOi8vd3d3LmFiYy5uZXQuYXUvbmV3cy8yMDIwLTEwLTA2L2J1ZGdldC0yMDIwLWNoZWF0LXNoZWV0LXRheC1jdXRzLWRlZmljaXQvMTI3MzE5MTbSASdodHRwczovL2FtcC5hYmMubmV0LmF1L2FydGljbGUvMTI3MzE5MTY?oc=5
2020-10-06 08:38:00Z
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