On the 2 April 2019, the Australian Government handed down the 2019-20 Federal Budget. The Budget focuses on a plan for a stronger economy and securing a better future for all Australians. New benefits have been introduced for Australian taxpayers, small to medium businesses (SMBs) and apprentices. We’ve put together a summary of the key takeaways on how the budget will affect you.
Australian Taxpayers
There are two significant changes for taxpayers. These changes will deliver $150 billion of additional tax relief for hard-working Australians.
- The Government is more than doubling the low and middle income tax offset from 2018-19.
- Lowering the 32.5 per cent tax rate to 30 per cent from 1 July 2024.
Tax Offset
According to Australian Treasurer, Honourable Josh Frydenberg MP, taxpayers earning up to $126,000 a year — including teachers, tradies and nurses — will receive a tax cut. For a single income family, this means up to $1,080 in your pocket per year. For families on a dual income, up to $2,160. The maximum amount of the low-income tax offset will increase from $530 to $1,080 annually and the base also increases from $200 to $255. Tax savings can go towards day-to-day living expenses. This includes mortgage repayments, utility bills, education costs or insurance. It should also help to relieve finance-related stress, benefiting more than 10 million taxpayers, with approximately 4.5 million people receiving the full amount of tax cuts and offsets.
Tax Rate
Further tax cuts are proposed for the bracket of Australians earning between $45,000 and $200,000 (approximately 94 per cent of Australians who are paying tax). The tax rate will be lowered from 32.5 per cent to 30 per cent. Although debatable, according to the Treasurer, Australia’s tax system is said to remain “highly progressive” with the top five per cent of taxpayers paying one-third of all income tax collected.
According to the OECD statistics, Australia has some of the highest debt levels in the world, with an average ratio of household debt to income around 216%. Lowering the tax rate will give lower income earners the opportunity to add the extra money to their household budget. Australian taxpayers are not the only winners in the 2019 Federal budget, SMBs Small Business are too.
Small to Medium Businesses
Company tax will be reduced to 25 per cent. The government will also inject $2 billion into the small business loan market increasing access to finance. The instant asset write-off threshold will increase to $30,000 and access will be extended to medium-sized businesses with an annual turnover of less than $50 million. These changes are said to benefit around 3.4 million businesses employing around 7.7 million workers. The threshold applies on a per asset basis, so eligible businesses can instantly write off multiple assets. A café could instantly write off a new fridge or coffee machine, a tradie to buy new tools or a work new car.
Additional support will go to the Australian Taxation Office (ATO) and Australia’s financial regulators following the Banking Royal Commission. This will strengthen the financial system and deliver better outcomes for all Australians. The budget also contains a new $525 million skills package to vocational education and training (VET) to ensure the Australian economy has the skills needed for now and the future.
Skills and Education
Approximately 80,000 new apprenticeships will be created in industries with skill shortages. Incentive payments to employers will also double to $8,000 per placement. Those who want to go into a trade will benefit from more support from the Government with a $2,000 incentive payment. This includes all new apprentices, such as bakers, bricklayers, carpenters and plumbers.
The Government will work closely with industry to train Australians in areas of future high demand. This includes communications technology, advanced manufacturing and health services. 10 new training hubs will connect schools, local industries and young people in regional areas with high youth unemployment. With more apprenticeships available and a higher incentive, Australians wishing to train their skills will have better opportunities to do so.
With many Australians feeling the pressure from increased costs of living and tightened household budgets, the proposed tax cuts are a positive step forward. Helping out SMBs in Australia will provide them with the opportunity to keep running and give them less of a chance of facing liquidation within the first few years of operation. Giving more incentives to employers and apprentices will increase Australia’s unemployment rate and increase job opportunities, especially in regional areas.
These changes, however, are still only proposals and are subject to the upcoming Federal election and the legislation passed in the senate.
