The 2020 Federal Budget is all about job creation, spending to make more jobs, and financial support. It creates one of the largest stimulus packages on record to promote economic growth and recovery.
Below is a summary of the key measures that impact you depending whether you are still working and accumulating assets, or a retiree.
Taxation Initiatives for Employees, Investors, and Small Business
Personal Income Tax Measures
From 1 July 2020, the Low Income Tax Offset (LITO) and the thresholds for the 19% and 32.5% personal
income tax brackets are proposed to increase. This means the tax cuts legislated to occur from 1 July 2022
(Stage 2 of the Government’s Personal Income Tax Plan) will commence two years early.
At present, clients do not start paying 32.5% tax until their income reaches $37,000 pa. This threshold will
increase to $45,000 pa. In addition, clients will not start paying 37% tax until their income reaches $120,000
a year instead of the current threshold of $90,000 per annum. From 1 July 2020, the proposed bring-forward of the tax cuts are largest for clients with annual income of $120,000 or more. Stage 3 of the Personal Income Tax Plan remains unchanged and commences in 2024/25 as legislated.
Proposed Tax Schedules From 1 July 2020
The proposed bring-forward of the personal income tax thresholds, rates and tax offsets create the following future tax savings.
Low Income Tax Offset
The LITO will increase from $445 to $700 from 1 July 2020. The Government has not brought forward all the changes as per Stage 2 of the tax plan. The low to middle income tax offset (LMITO) will be retained in the 2020/21 financial year. The Government does not intend on retaining LMITO in the 2021/22 financial year. Under current legislation it is set to end in the 2022/23 financial year.
Medicare Levy Thresholds Increased
The Medicare Levy thresholds have been increased slightly for the 2019/20 financial year.
*Seniors and pensioners tax offset
For each dependent child or student, the family income thresholds increase by a further $3,533 (previously $3,471).
Business Tax Deduction for Capital Asset Expenditure
Businesses with an aggregated turnover of less than $5 billion can deduct the full cost of eligible capital
assets acquired from 7:30pm AEDT on 6 October 2020 that are first used or installed by 30 June 2022.
Eligible capital assets include: new depreciable assets, the cost of improvements to existing eligible assets, second-hand assets where the business has an aggregated annual turnover of less than $50 million.
Businesses with an aggregated annual turnover of less than $10 million can deduct the balance of their
simplified depreciation pool at the end of the income year while full expensing applies. The provisions which prevent small businesses from re-entering the simplified depreciation regime for five years if they opt-out will continue to be suspended.
Companies Allowed to Carry Back Tax Losses
Eligible companies can carry back tax losses from the 2019/20, 2020/21 and 2021/22 financial years to
offset previously taxed profits in the 2018/19 or later financial years. This will generate a refundable tax offset in the year in which the loss is made. An election for the tax refund is made when lodging the 2020/21 and 2021/22 tax returns. Alternatively, companies can still carry forward tax losses as normal.
Expanded Access to Small Business Tax Concessions
Businesses with an aggregated annual turnover between $10 million and $50 million will have access to
small business tax concessions which are currently only available to businesses which have less than
$10 million in annual turnover.
Fringe Benefits Tax Exemption for Employer-Provided Retraining
From 2 October 2020, employers who provide retraining and reskilling to redundant, or soon to be
redundant, employees will be exempt from fringe benefit tax (FBT). Currently, FBT applies if an employer
provides these employees with training that does not have a sufficient connection to their current
employment. The FBT exemption will not apply to retraining acquired through a salary sacrifice arrangement, Commonwealth supported places at universities or repayments towards Commonwealth student loans.
Initiatives for Retirees and Aged Care
Pleasingly, the Government committed to their election promise that there will be no adverse tax changes to the superannuation system.
Minimum Withdrawal Thresholds for Self Funded Retiree Pension Accounts
The Government reiterated that to assist retirees, the 50% reduced minimum annual payment required for account-based pensions, allocated pensions, and market-linked pensions would continue until 30 June 2021. Full details can be read at: https://www.ato.gov.au/rates/key-superannuation-rates-and-thresholds/?anchor=Minimumannualpaymentsforsuperincomestrea
Social Security Support Payments
Two tax-free economic support payments of $250 each will be paid to individuals in November 2020 and March 2021 who are in receipt of certain government income support and health care card holders including the:
- Age Pension
- Disability Support Pension
- Carer Payment
- Carer Allowance
- Family Tax Benefit
- Double orphan pension
- Commonwealth Seniors Health Card
- Pensioner Concession Card
- Eligible Veterans’ Affairs payment recipients and concession card holders.
Those individuals eligible for the Coronavirus Supplement of $250 per fortnight, such as those
receiving the JobSeeker Payment, are not eligible for the one-of f $250 Economic Support
Payment. In addition, if an individual only holds a Low Income Health Care Card, they do not qualify for the
one-off $250 Economic Support Payments.
Aged Care Support for Older Australians
From 2020/21 the Government will provide the following support for elderly and disabled Australians:
- the release of 23,000 additional home care packages across all package levels
- the replacement of the current ‘Commonwealth Continuity of Support Programme’ with a new
Currently the waiting time for higher level home care packages is more than 12 months, with more than
100,000 older Australians waiting for their packages to be funded. Additional home care packages will
assist in reducing waiting times for those who have been approved for a home care package.
The ‘Disability Support for Older Australians’ will allow older disabled
Initiatives for Young People, Job Seekers, and Up-Skilling
JobMaker Hiring Credit
To support organisations in taking on new employees, the Government proposes to pay a hiring
credit for up to 12 months for each new job. This is available from 7 October to employers who hire
eligible employees age 16 to 35.
The credit will be paid quarterly in arrears at the rate of $200 per week for those age 16 to 29, and
$100 per week for those age 30 to 35. Eligible employees are required to work a minimum of 20
hours per week and receive the JobSeeker Payment, Youth Allowance (other) or Parenting Payment
for at least one month out of the three months prior to when they are hired. To be eligible, employers will need to demonstrate an increase in overall employee headcount and
payroll for each additional new position created.
Apprenticeships Wage Subsidy
From 5 October 2020 to 30 September 2021, businesses of any size will be able to claim a new
Boosting Apprentices Wage Subsidy for new apprentices or trainees who commence during this
Eligible businesses will be reimbursed up to 50% of an apprentice or trainee’s wages worth up to
$7,000 per quarter, capped at 100,000 places.
The wage subsidy will support school leavers and workers displaced by the Coronavirus-related
downturn to secure sustainable employment.
Youth Allowance and ABSTUDY Independence Test
The Government is making a temporary change to the criteria used to determine independence for
Youth Allowance and ABSTUDY. The independence test is important as young people who are considered independent from their parents are not subject to the Parental Income Test.
There are a number of ways of meeting the independence test; however, a common method is to
meet the workforce participation criteria which require young people to work 30 hours per week for
at least 18 months within a two-year period.
Under this temporary measure, from 1 January 2021 all Youth Allowance and ABSTUDY applicants
will automatically be deemed to have worked over the six-month period from 25 March 2020 to 24
Parental Leave Pay Work Test Extension
The Government is temporarily extending the work test for Paid Parental Leave and Dad and Partner
Pay from 13 months to 20 months, for those affected by the Coronavirus pandemic.
To be eligible for the extended work test, the individual must:
- not meet the current work test because their employment is impacted by the Coronavirus pandemic, and
- have a child born or adopted between 22 March 2020 and 31 March 2021.
For Parental Leave Pay, the work test period for these parents will be extended f rom 13 months to 20 months before either the:
- birth or adoption of their child, or
- start of their Dad and Partner Pay period.
This means work undertaken by the parent before Coronavirus can be counted towards the work
In the extended 20-month work test period, these parents will need to meet the work test requirements of:
- 330 hours in a 10-month period, and
- no more than a 12-week break between work days.
Superannuation ‘Stapled’ to a Member
When a person starts a new job and does not nominate a superannuation fund, employers will be required to find and contribute to the employee’s existing superannuation account, rather than the employer’s default superannuation fund.
Under this measure, the existing superannuation account will be ‘stapled’ to the member so that they keep
their current superannuation fund when they change jobs and reduce the consequence of unintended multiple superannuation accounts.
From 1 July 2021, employers will be able to obtain the new employee’s existing superannuation fund details from the ATO’s online services. It is important to note that the opportunity to nominate a chosen fund is still available under this reform.
First Home Loan Deposit Scheme Extended
The First Home Loan Deposit Scheme will be extended to provide an additional 10,000 guarantees in
2020/21 to allow eligible first home buyers to build a new home or purchase a newly constructed home
sooner with a deposit of as little as 5%. More details available at: https://www.nhfic.gov.au/what-we-do/fhlds/
HomeBuilder Scheme Reaffirmed
The Budget reaffirmed the HomeBuilder scheme will provide eligible owner-occupiers (including first home buyers) with a grant of $25,000 to build a new home or substantially renovate an existing home where the contract is signed between 4 June 2020 and 31 December 2020. Construction must commence within three months of the contract date.
HomeBuilder will complement existing State and Territory first home owner grant programs, stamp duty
concessions and other grant schemes, as well as the Commonwealth’s First Home Loan Deposit Scheme
and First Home Super Saver Scheme. More details available at: https://treasury.gov.au/coronavirus/homebuilder
Full details on all the initiatives above can be sourced from: