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What’s up people!
Gosh, what a cash splash in the highly anticipated Federal Budget 2020.
Money, money, money, everywhere you look.
In what was billed (see what I did there) as one of THE most important budgets for Australia since the Great Depression, and the first in a recessionary Australia in almost 30 years – Treasurer Josh Frydenberg rolled out (as expected) a whole bunch of tax cuts, job creation measures and targeted spending to kickstart our economy.
And if you don’t have the time nor inclination to read through the mountains of reports and commentary, then welcome to the ONLY guide you’ll need.
I’ll take you on a magic carpet ride on the main winners and losers of the 2020 Federal Budget, as well as provide my own insights to each.
Big Picture Numbers
But first, some context.
Get ready cos there’s gonna be some big numbers thrown your way…
It wasn’t so long ago that the federal government was obsessed (in an almost unhealthy way) of balancing the budget in 2019.
Fast forward 12 months, and our budget deficit is now projected to be $213.7 billion this financial year – the biggest deficit in 75 years.
Net debt levels will be $703 billion, an enormous rise from the $85.3 billion last financial year.
And with our cash rates at 0.25%, there is diddly squat the Reserve Bank can do to stimulate the economy.
Indeed, there was talk of a further reduction of 0.1% at Tuesday’s meeting… which would be the definition of fwack-all in my books.
Therefore all eyes was on Mr Frydenberg to see what he, and the government would deliver…
Let’s take a look shall we?
Main Budget Winners
And the winner is…
Businesses with turnover up to $5 billion will be able to deduct the entire cost of eligible depreciable assets. This covers 99% of all businesses. They will be able to claim back tax prior to COVID-19 to offset COVID-19 losses in FY20, FY21 and FY22.
Verdict: Should be good for investment in new plant and equipment and hence spur business lending and investment. The back claiming of taxes should increase business confidence also to spend, spend, spend.
Businesses with turnovers between $10 million – $50 million will benefit from over 10 different tax concessions including the fringe benefits tax.
Verdict: Good to see the government reaching for the low hanging fruit of changing tax laws to try and stimulate smaller businesses. Why? Because small and medium businesses jobs make up over HALF of all jobs in Australia. Absolutely crucial cog they are.
Tax Cuts For Workers
Probably the biggest impact, is the bringing forward of proposed tax cuts by 12 months.
This includes the extension of the tax offset of up to $1,080 to average income earners ($48,000 – $90,000).
And the increase of the 19% marginal tax threshold from $41,000 to $45,000.
As well as the increase of the 32.5% threshold from $90,000 to $120,000.
This means that for those of us earning $120,000 or more – we are $2,745 better off.
Those earning $80,000 – are $2,160 better off.
And those earning $40,000 – are $1,060 better off.
Verdict: More money in our pockets is better than less, well d’uh!
Some of those on aged, disability, carer and family welfare will receive $500 over 2 x $250 cash payments in December 2020 and March 2021.
Verdict: It’s RAINING cash.
First Home Buyers
A further increase of eligible first home buyers, with an additional 20,000 able to access the first home buyer loan scheme, where you’re able to purchase a home with a deposit as little as 5%.
Verdict: Surprisingly (or perhaps less so, given our obsession with housing) this scheme has been well taken up, and reached capacity quite quickly. Expecting first home suburb values to hold and/or increase with the new demand.
100,000 new apprenticeships will be created through a new $1.2 billion apprenticeship support package, where the government will pay half the wages of a new apprentice taken on by businesses.
Verdict: Great initiative to be honest, Australia needs more tradies to provide more competition to the existing ones, I mean, do you know how much a plumber costs these days? Daylight-fooking-robbery. Sigh, shoulda been a plumber.
$14 billion in new and fast-tracked infrastructure projects. That’s gonna be a whole lot of new roads and rails… I wonder if they will finally start to build the Sydney-to-Melbourne fast rail network?
Verdict: More infrastructure is definitely needed… oh and did I tell you guys how I almost became a plumber? True story, I’m quite good with my hands you see…
A new $100 million regional recovery fund, targeting those areas affected by drought, bushfire and COVID-led border restrictions.
Verdict: Couldn’t come at a better time, regional Oz has been doing it TOUGH these few years, poor basterds.
Granny Flat Owners
A bit of a side note here, but capital gains tax will be scrapped for granny flats.
Verdict: Of course, doesn’t affect everyone, but good to see that our elderly relatives are more protected against financial abuse (previously, informal arrangements were struck with elderly relatives who live in the granny flat out the back – because signing a formal (and legal) lease would constitute “income-generation” and hence not have CGT exemption when it came time to sell).
And of course, still the elephant in the room. Over $1.7 billion with Oxford University and the University of Queensland to develop the vaccine and support new antiviral therapies and support trials.
Verdict: Imagine if Oz was the first one to develop a global vaccine. Would AGAIN be punching above our weight, AUSSIE AUSSIE AUSSIE, OI OI OI.
Main Budget Losers
When there are winners, there are losers…
The COVID supplement paid to those on Jobseeker will end on December 31. It will go back to the original rate of around $40/day (for singles).
Verdict: Hm tough one, though can understand – the teat of government has to be stopped sometime.
Verdict: Completely excluded from the budget. With record low interest rates, self-funded retirees (which I aim to be one), get no leg up from our government.
Mutters to self “everything has to be done the hard way”.
Controversial one here. The number of humanitarian refugees allowed will drop by 5,000. The government has introduced a new cap of 13,750 places per year. In addition to introducing a basic language competency test for partner visas and permanent resident sponsors.
Verdict: It’d be a shame to prohibit those who want to enter this great country of ours for a better life for their and their future generations. Sigh, the way the world is these days.
The banks will miss out on wage subsidies and investment write-offs and loss carry-backs aforementioned above.
Verdict: Oh dear. What. A. Shame.
Poorly Performing Super Funds
A new government website to publicly rank all super funds, to hopefully name and shame those underperformers.
Verdict: FINALLY, CEO’s of dud super funds will be squirming in their seats. What a rort they have caused with decades of fee gouging and poor returns.
Hm, not many surprises here.
With the current economic environment, the budget had to be about ways to stimulate the nation.
And with billions of dollars being handed over, our deficit will surely worsen.
So again, it’s our future generations who will pick up the slack.
But for the next 12 months, it’d all be about jobs, jobs, jobs and spend, spend, spend!
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P.S. All opinions are my own, please do your own research to verify the figures and numbers labelled here!