Australian Federal Budget 2020 - Expat Edition
The Australian Federal Budget of 2020 was closely watched by Australian expats all over the globe given these unprecedented times that we’re all going through. With rising unemployment, businesses closing their doors, Covid numbers rising globally, border closures and no imminent vaccine – it was clear that this Budget was going to have to focus on creating jobs, stimulating confidence, getting new infrastructure projects underway and getting us all through this period.
This week I’ve outlined the key takeaways from this year’s Federal Budget, how they impact Australians across the globe and what you need to know.
Federal Budget Highlights
The Deficit was announced at $213.7 billion, with a net debt position currently of $703 billion, which represents 36% of Australia’s GDP. This has been a focal area of the media and certainly caused some concern at these levels, however we believe a lot of this panic is overdone. This is forecast to spike to $966 billion by 2024, or 44% of our nation’s GDP. This does highlight that we’ll likely need to see inflation rising going forward to get our nation out of debt.
Key Budget Announcements
Outlined below are some of the key announcements that came out of the Australian Federal Budget.
- Tax Relief: Personal income tax cuts were brought forward, which are expected to benefit approximately 7 million Australians. We also saw businesses being allowed to carry backward tax losses to offset previous gains over the past three years, which may be a much needed boost for many, and the instant asset write off allowances for Australian businesses also. The instant asset write off we believe is one of the most significant announcements in this year’s Budget.
- Job Creation: The JobMaker program was announced, which is expected to create 450,000 jobs for 16 – 35 year olds and JobTrainer, which is a $1 billion training program in addition to a $1.2 billion wage subsidy for 100,000 apprenticeships across Australia.
- R&D: We saw $2 billion announced for R&D incentives via CSIRO and Universities, and a Climate Change fund to receive $1.9 billion to support renewable technologies.
- Infrastructure: We saw the announcement of $14 billion to accelerate new projects and create new jobs, $2 billion committed to road safety upgrades and $2 billion to water infrastructure.
- Environment: National Parks is to receive $233 million, ocean protection $67 million and recycling infrastructure an additional $250 million.
- Healthcare: 23,000 new home care packages will be created with the aim of allowing older Australians to remain in their own home for longer totalling $1.6 billion, as well as the NDIS receiving $3.9 billion.
- Cybersecurity: Clearly a focus area globally amongst Governments, and this year’s Budget certainly explored this area with $1.7 billion committed to supporting development in this space.
- Superannuation: While we didn’t see any major reform, changes to contribution allowances or otherwise, we did see some small tweaks. Superannuation funds will be tied to the individual with the aim of avoiding duplicate super funds, which will likely be of greatest benefit to younger employees who tend to changes employers frequently and end up with many super funds. We will also see the benchmarking of MySuper products by APRA and the launch of a YourSuper comparison tool for the MySuper products.
Australian Economic Forecasts
The Australian Federal Budget provides some insight into economic expectations for Australia going forward. I’ve outlined the key elements below:
- GDP forecast for 2021: +4.25%
- Wage growth for 2021: 1.5%
- Net migration for 2021: -72,000
- Net migration for 2023: +201,000
- Inflation forecast for 2021-22: +1.5%
Australian Resident Impacts
The key announcements for Australian residents are outlined below:
- Personal Income Tax Cuts: Personal income tax cuts that were originally scheduled for 1 July 2022, are now brought forward as per the table below. These tax thresholds will be as follows:
- Economic Support Payments: Pension and support payment recipients will receive two payments of $250, the first of which in November 2020, and the second early in 2021.
- Granny Flats Removed from CGT: Capital Gains Tax (CGT) will no longer apply where there’s a family arrangement or there are personal ties where a granny flat arrangement has been created. This is quite a complex area, so we would certainly suggest seeking professional financial advice here.
- First Home Loan Deposit Scheme: We have seen a further 10,000 places released for the First Home Loan Deposit Scheme, which allows first-home buyers to enter the property market in their first home with just a 5% deposit.
There were also some announcements for Australian businesses, which were also largely positive. I’ve outlined these key updates below:
- JobMaker: This one will see a $200 / week subsidy for those new employees between 16 – 29 years of age, and $100 per week for those 30 – 35. Importantly, existing employees can not be terminated and re-hired.
- Capital Asset Deductions: This was a more significant announcement, which now allows businesses to fully expense their new depreciable assets in the first year of use, rather than over their depreciable lives.
- Carry Back Losses: Further, Australian companies can now also carry back losses from financial years 2019-20, 2020-21 and 2021-22 to 2018-19, 2019-20 and 2020-21. This is actually just a re-introduction of Gillard’s rules.
Australian Expat Impacts
There were very few announcements in the Australian Federal Budget that will impact Australian expats. These I have outlined below:
- Corporate Tax Residency: There has been clarity provided over when an Australian company would be treated as an Australian tax resident, as there has been some confusion here in the past, which could impact Australian expats overseas with companies registered in Australia.
Unfortunately, there were no updates regarding borders re-opening, or changes to the Main Residence exemption.
To Your Financial Success!
Jarrad Brown is an Australian-trained and qualified Fee-Based Financial Planner with Australian Expatriate Group of Global Financial Consultants Pte Ltd providing specialist financial advice and portfolio management services to Australian professionals in Singapore. Jarrad Brown is an Authorised Representative of Global Financial Consultants Pte Ltd - No: 200305462G | MAS License No: FA100035-3
Australian Expatriate Group is a division of Global Financial Consultants in Singapore providing specialist advice to Australians living abroad.
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General Information Only: The information on this site is of a general nature only. It does not take into account your individual financial situation, objectives or needs. You should consider your own financial position and requirements before making a decision.
*Please note that Jarrad Brown is not a tax agent or accountant and none of the content outlined here should be taken as personal advice. You should consult your tax agent and financial adviser to review your current personal finances and financial goals to consider whether this strategy is appropriate for you.
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