The 2020-2021 Federal Budget - 12th October 2020

Last Tuesday the Federal Government delivered the 2020-2021 Federal Budget and more importantly, by Friday it has been passed by both Houses of Parliament.

Billed as a road to recovery paved with cash, the key initiatives include:

  • Personal income tax cuts brought forward to apply from 1 July 2020,
  • A $4 billion 'JobMaker' Hiring Credit to encourage businesses to take on additional employees aged 16 to 35 years old,
  • $110 billion in infrastructure investment over 10 years,
  • Immediate deductions for certain business investment in capital assets,
  • Changes to how companies can manage losses, and  
  • Access to generous tax concessions for a wider range of businesses.

In respect of the personal tax cuts, we have already had a number of enquiries from clients as to what to about the higher rates of tax already taken out to date. We remind all employers that they are obligated to withhold taxes according to the schedules provided by the Australian Taxation Office (ATO) and these rates usually find their way automatically into the online payroll programs being used by most employers. That is the extent of your obligations. We do not recommend trying to circumvent payroll calculations that give employees a refund of the excess taxes taken out to date, you do not have the authorisation from the ATO to do that.
An employee can always fill in a PAYG Withholding e-variation and send it to the ATO. If the ATO approve the variation, then you as the employer will receive a letter from the ATO outlining how much tax to deduct from now to 30 June 2021.
The link to the form is here -

The Budget also contains two additional Economic Support payments to pensioners and other eligible recipients to drive money back into the economy.

By comparison to many, Australia has managed the COVID-19 pandemic well, but good management isn't enough to protect us from the $213.7 billion deficit in 2020-21. The Government has taken to heart the old adage, "You have to spend money to make money" to trade our way out of a black hole.

Some of the measures are aimed at addressing the harsh lessons COVID-19 has taught us and seek to centralise production back in Australia to ensure our industries can be self-reliant.

Outside of the big ticket tax measures, what is striking about this Budget is the sheer volume of initiatives it funds - too many to itemise in this update. Many of the initiatives aim to improve how Government interacts with the community and business in particular. This funding is focused on streamlining interaction and compliance with Government requirements and investing in the IT infrastructure required to digitise the compliance process.

The final comments in the Treasurer's Budget speech paint a cautionary tale. The focus right now is on the path to growth and stabilising debt in an effort to boost consumer and business confidence. However, once “recovery has taken hold and the unemployment rate is on a clear path back to pre-crisis levels” of below 6%, the second phase will kick in - the deliberate shift from providing temporary and targeted support to stabilising debt.

Find full details of the 2020-20201 Federal Budget update here.

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