Budget 2020: Australia’s tax and superannuation systems get a makeover
More than 11 million Australians will get a backdated tax cut, and superannuation accounts will now follow employees from job to job.
More than 11 million Australians will get a tax cut backdated to July 1 this year, in a federal budget that aspires to create hundreds of thousands of new jobs and keep local businesses not just open but hiring.
Declaring his budget to be jobs-focused, Treasurer Josh Frydenberg outlined numerous initiatives aimed at supporting jobs and restructuring the nation’s tax system.
“There is no economic recovery without a jobs recovery. There is no budget recovery without a jobs recovery,” the Treasurer stated.
“This budget is all about jobs.”
An immediate new JobMaker hiring credit will be payable for 12 months to employers who hire people on JobSeeker aged between 16 and 35. They must be employed for a minimum of 20 hours a week.
Big banks will not be eligible for the credit, but all other businesses will.
The credit will be paid at the rate of $200 per week for those aged under 30, and $100 per week for those aged between 30 and 35.
Treasury estimates the initiative will help support about 450,000 jobs for young people, while a further $1.2 billion investment in JobTrainer hopes to create 100,000 new apprenticeships through a 50% wage subsidy for businesses that employ trainees.
The budget also funds 50,000 new higher education short courses in agriculture, health, IT, science and teaching.
On tax cuts, the Treasurer promised Australians that they will have more of their own money to spend.
Lower- and middle-income earners get a backdated cut this year of up to $2,745 for singles, and up to $5,490 for dual-income families compared with 2017-18.
“We will achieve this by bringing forward stage two of our legislated tax cuts by two years,” Frydenberg said.
“Lifting the 19 per cent threshold from $37,000 to $45,000 and lifting the 32.5 per cent threshold from $90,000 to $120,000.”
The Low and Middle Income Tax Offset will be retained for an additional year.
More than 7 million taxpayers will receive a tax cut of $2,000 or more this year, while 11 million overall will receive some backdated tax relief.
The government hopes the economic activity generated by those savings alone will create 50,000 new jobs.
The budget describes a structural reform of Australia’s tax system that will result in 95% of taxpayers with a marginal tax rate of no more than 30 cents in the dollar in 2024-25.
Superannuation accounts will now be able to follow employees from job to job, with new super accounts no longer being automatically created when workers change employers.
Super funds will have to meet annual performance tests, with poor performers required to notify their members. The government will set up a YourSuper online comparison tool.
In more incentive for businesses, almost all will also be able to immediately write-off the full value of eligible assets purchased.
The initiative targets small, medium and larger businesses with a turnover of up to $5 billion until June 2022. Losses incurred can be offset against prior profits made in or after the 2018-19 financial year.
The Treasurer described the move as a “game-changer” that will unlock investment and “boost the order books” of the nation.
The second Women’s Economic Security Statement is included in the budget, with $240 million in measures supporting cadetships for women in science, technology, engineering and mathematics, job creation and entrepreneurialism, and women’s safety.
A $1.3 billion modern manufacturing plan will prioritise food and beverages, resources and minerals processing, medical products, recycling and clean energy, defence industry, and space industry. An additional $2 billion is also provided for research and development incentives.
But these and other budget initiatives come at a hefty price for the nation’s bottom line.
COVID-19 has hit Australia’s economy hard and the government’s response to it has cost dearly.
With the actual deficit currently standing at $85.3 billion, it is estimated to reach $213.7 billion this financial year, falling to $66.9 billion by 2023-24.
The economy is forecast to fall by 3.75% this calendar year and unemployment to peak at 8% in the December quarter.
Next calendar year, the economy is forecast to grow by 4.25% and unemployment to fall to 6.5% by the June quarter 2022.
Frydenberg said the government’s fiscal strategy has two phases.
Firstly to focus on boosting consumer and business confidence, and thereby create jobs, and second, a deliberate shift from providing temporary and targeted support.
“We will then rebuild our fiscal buffers so that we can be prepared for the next economic shock,” the Treasurer said.
This article was first published by The Mandarin.
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