Last Tuesday night Treasurer, Josh Frydenberg, delivered the federal budget for 2020-21 after it was put on hold due to the COVID-19 pandemic. This budget was significantly different from the others due to major Australian events including the 2019-20 bushfire emergency and the unprecedented COVID-19 pandemic which has disrupted the lives of the Australian community and all countries worldwide.

Now is the time more than ever to understand what the outcomes are of the budget AND more importantly how does it impact your business and your personal tax position. We have made this easier for you and have summarised the important issues to know so continue to read on and be informed.

The Economy Landscape

The COVID-19 pandemic was a shock to the world with many Australians looking for guidance and support from our leaders. The Government responded with a $299 billion support package and for business owners, this included JobKeeper and Cash Flow Boost.

Here is a comparison of how dramatically our economy has changed since last year’s budget:

The Government is focused on transitioning the economy to recover from its revenue deficit and expected highest unemployment rate. Although they are resolving ways to grow the economy again, the impact of COVID-19 will still be felt in the Australian economy for many years to come.

The Government’s record investment in health includes:

Essential Health Services has become a big focus due to COVID-19 in which the budget delivered a record spending of $115.5 billion in 2020-21 (up $11.5 billion from last year’s spending) and $467 billion in a future four-year plan in order to look after Australians under the long term National Health Care Plan.

A breakdown of the highlights includes:

· $119.3 billion to be invested in Medicare of which $2.4 billion will be put towards Telehealth.

2020–21 funding of $23.6 billion towards increasing hospital capacity and
$113.6 billion over five years of which:
- There will be a $33.6 billion through the new five-year National Hospital Funding Agreement.
- Private Health Insurance (PHI) Reforms to continue reducing costs for insurers and consumers.

· Medicine funding totaling $41.5 billion over four years. This will also include the creation of the PBS New Medicines Funding Guarantee

· The Medical Research Future Fund (MRFF) totaling $20 billion has finally reached maturity to be able to deliver life-changing research. $424.3 million in new grants programs and opportunities are now available.

$2.3 billion investment towards COVID-19 treatments and vaccines

· Women who suffer from Ovarian Cancer will have access to Lynparza for $41 (high cost treatment is valued at $140,000).

· $230.8 million investment into sport and preventive health which includes $44.9 million that will be assisting thalidomide survivors.

For the Aged Care industry, it was announced that there will be an additional 23,000 home care packages. This is a part of a $2 billion aged care boost and of which the packages will begin from this year and will see a total number of home care packages grow to 185,597 by June 2021.
Recognition that mental health is a big issue coming from COVID-19. $5.7 billion will be put towards mental health which will double the amount of access currently available from 10 to 20 Medicare-funded psychological services

Business Owners and Individuals

Over the next two years, the Government has announced relief measures totaling $26.7 billion that will be available to 3.5 million businesses which employ over 11.5 million workers. Here is a list of some measures for businesses to take into consideration.

JobMaker Hiring Credit

The new JobMaker Hiring Credit regime allows businesses to take advantage of this incentive by taking on new additional young job seekers aged between 16 to 35.

From 7 October 2020, eligible employers can claim the following for each eligible employee:

· $200 a week for each eligible employees aged 16 to 29.

· $100 a week for each eligible employee aged 30 to 35 years old.

To be eligible, the employee must have received the JobSeeker Payment, Youth Allowance (Other), or Parenting Payment for at least one of the previous three months at the time of hiring. The JobMaker Hiring Credit will be claimed quarterly in arrears by the employer from the Australian Taxation Office (ATO) from 1 February 2021. Employers will need to report quarterly that they meet the eligibility criteria. The JobMaker Hiring Credit is designed to support new employment so they do not need to satisfy a sales turnover decline test.

New jobs created up until 6 October 2021 will be able to access the JobMaker Hiring Credit for up to 12 months from the date the new position is created. This will help young people to access job opportunities while the economy has a chance to recover.

Suzanne Greenwood said that, “As small businesses, Australia’s 5,800 community pharmacies will welcome the JobMaker hiring credit”. “We also support the establishment of a JobTrainer fund, which is intended to support job seekers, school leavers and other young people to remain engaged and have the opportunity to acquire the training and skills that will help them get a job.”

Instant Asset Write Off

Small and medium-sized businesses that have a turnover of less than $50 million will be able to access the instant asset write off by fully depreciating eligible assets costing up to $150,000. This write off is available from 7:30pm (AEDT) 6 October all the way through to 30 June 2022.

Mr Frydenberg said that this was “a game changer and it will unlock investment” opportunities for 3.5 million business which is equal to 99% of Australian business.

Company Relief Measures

Those businesses in a company structure will be able to access the following relief measures:

· Temporary Loss Carry-Back for Companies: Companies with a turnover of up to $5 billion will be able to offset losses from 2019-20, 2020-21 or 2021-22 income years against previous profits where tax was paid in 2018-19 or later income years. This will allow cash flow support to businesses by generating a refund back to them. The Government is encouraging and hoping businesses will use this relief to put this towards future investments.

· Tax Rate Reduction: Small businesses with a turnover of less than $50 million will be able to access a reduced tax rate from 27.5 to 25 per cent. This tax rate cut was to commence in two years’ time however it has been brought forward to start from 1 July 2020.

Digital Technology

$26.2 million has been allocated by the Government to enable small businesses to access digital technology to assist and transform their trading operations without interruption. The measures to support small and family business include:

o $19.2 million to encourage and support small businesses to transform into digital technology. After the impacts of the COVID-19 business environment, the Government wants to give small businesses access to expert advice to help them make the most of the digital economy for future business opportunities.

o $7 million will go towards providing business and mental health support for small business owners who are under increased financial and emotional pressure during the COVID-19 pandemic.

Individual Taxpayers

The Government has brought forward the personal income tax cuts that were supposed to take place in 2022. Starting 1 July 2020, lower and middle income earners will have tax relief of up to $2,745 for singles and $5,490 for dual income families.

The table below from the budget shows the comparison of tax savings from the 2017-18 versus 2020-21 year as well as the new personal income tax rates.

Adult Children on Parents Private Health Policy

Previously, young adults who were still dependent could remain on their parents’ health insurance policy until they turn 24. The age limit has now increased and they can remain on the policy until they turn 31.

IMPORTANT NOTE: On Friday, 9 October, the legislation for the budget was passed through Parliament without any changes.

For more information and how the budget affects you and your business, please feel free to contact our office.

Written by Practice Manager, Victoria Le.

Resources:

Australian Federal Budget 2020-21: https://budget.gov.au/index.htm

AJP: https://ajp.com.au/news/budget-2020-whats-in-it-for-business/

Pharmacy Daily: https://pharmacydaily.com.au/news/pharmacy-welcomes-budget-2020-21/92049

Department of Health: https://www.health.gov.au/ministers/the-hon-greg-hunt-mp/media/budget-2020-21-record-health-and-aged-care-investment-under-australias-covid-19-pandemic-plan