Federal Budget Summary - What it means for individuals and families

Here is a summary of the key takeaways for individuals and families from the 2020 Federal Budget announcement.

The Australian Treasurer, Josh Frydenberg, has delivered a highly stimulatory budget in the face of the COVID-led downturn. The 2020 Budget is all about jobs, jobs and spending to make more jobs. We already have JobSeeker and JobKeeper, and now we have JobMaker and JobTrainer.

Long gone is any suggestion about a return to surplus soon, with deficits expected each year over the medium-term projections to 2030/31.

The budget centres around three key measures for the economic recovery:

• The bringing forward of the second stage of the tax cuts from 2022/23 to this financial year, which should increase household disposable income by about $12.5 billion over the next 12 months (0.6% of GDP).
• The refined wage subsidy program that targets individuals under the age of 35.
• Increasing infrastructure spending by $10 billion over the next four years, adds to an already substantial pipeline and brings the total to $110 billion over ten years.

From an individual’s point of view, WLM sees the below changes being the major announcements out of the 2020 budget:

Personal income tax cuts

The Government has brought forward stage 2 of its planned income tax cuts by two years. The Treasurer has stated that “more than 11 million taxpayers will get a tax cut backdated to 1 July this year”. Originally intended to apply from 1 July 2022, the tax cuts will come into effect from 1 July 2020 have now been passed by Parliament.

Below is a table outlining Stage 2 and Stage 3 tax cuts:

As a guide, bringing forward Stage 2 of the personal income tax plan will:

• Increase the top threshold of the 19% tax bracket to $45,000 (from $37,000)
• Increase the top threshold of the 32.5% tax bracket to $120,000 (from $90,000)
• Increase the low income tax offset from $445 to $700

Superannuation reform package: Your Future, Your Super

Under this proposal, effective from 1 July 2021, once an employee has a super fund and they change jobs, their new employer will contribute to their existing fund. Employees will, however, be able to advise their employer to make contributions to a different fund if they wish.

First Home Loan Deposit Scheme extended

First Home Loan Deposit Scheme has been extended allowing an additional 10,000 first home buyers to participate.

Social Security and Aged Care

Two tax-free economic support payments will be paid to aged pensioners, veterans and eligible concession cardholders – one payment in November 2020 and the other in early 2021.

As a way to support older Australians in aged care, the Government will also provide 23,000 additional home care packages across all package levels. Great news for the 100,000 Australians on the waiting list for these packages.

Capital gains tax removed from ‘granny flats’

From 1 July 2021 a capital gains tax (CGT) exemption will be introduced for formal, written granny flat arrangements that are created, varied or terminated. This will encourage elderly Australians to enter formal written arrangements that provide them protection in the event of a family or relationship breakdown and reduce the risk of financial abuse.

How can WLM Financial Services help

Most changes must be legislated and passed through Parliament before they apply. If you think you may be impacted by some of the Budget’s proposed changes, especially the use of surplus income from proposed tax cuts, you should consider seeking professional advice. A financial adviser can give you a clearer understanding of where you stand and how you can manage your cash flow, super and investments in light of the proposed changes.

Find out more about our range of Financial Planning services or book a meeting for a friendly follow up to discuss these measures and your financial future with us.