Summary
With the tentative steps out of the COVID nightmare, this year’s Federal Budget focused on the ongoing protection from the Virus and encouraging the continued economic recovery through consumer spending and business investment.
The $300 billion the government has spent on health support and economic stimulus has left us with a huge hole in the budget and our decade of deficits is set to peak in 2025 at almost $1 trillion. We said after last year’s Budget, huge stimulus measures were needed. But our future selves will have a lot of paying back to do.
In Labor’s budget response last night, Anthony Albanese lamented the lack of “real reform” which didn’t address low wage growth or support real social and environmental reform. But it was more an attack for what wasn’t in the budget rather than what was.
Key Points
While the list below is not exhaustive, we provide some of the key takeaways from the night.
COVID
- So far around 2.7 million Australians (10%) have received a vaccination.
- The hope is for all Australians to be fully vaccinated by the end of the year and borders to open fully for tourism and migration in 2022.
- $1.9 billion will be provided over five years for vaccines.
- A further 30 million doses of the Pfizer vaccine have been contracted.
Economy
- Real GDP has recovered quicker than expected and is forecast to rise by 5.25% in 2021.
- Unemployment is expected to fall to 5% in 2022 and 4.75% by June 2023.
- The government now expects the Federal budget deficit to peak at a record $161 billion this financial year – $52 billion lower than forecast six months ago.
- Commonwealth net debt is expected to hit almost $1 trillion in 2025.
Infrastructure
- The Government has committed an extra $15.2 billion to new infrastructure projects.
- This is on top of the $110 billion 10-year infrastructure plan.
- It is hoped these measures will create 30,000 more jobs.
Jobs
- An additional $2.7 billion to extend the Boosting Apprenticeship Commencements program and a further $500 million (to be matched by state and territory governments) to expand the JobTrainer Fund by a further 163,000 places.
- An additional $1.7 billion for more affordable childcare, $12.2 million towards the National Careers Institute Grants Program and $42.4 million for financial support for STEM careers – all aiming to boost women’s economic security and participation in the workforce.
Tax
Individuals
- More than 10 million low and middle-income earners will benefit from extended tax cuts to 30 June 2022. The Low- and Middle-Income Tax Offset (LMITO) applies to individuals with taxable income up to $126,000.
- The Medicare Levy Surcharge and Private Healthcare thresholds remain unchanged.
Business
- Extension of the temporary deduction for the full cost of eligible depreciable assets in the first year they are used for businesses with turnover up to $5 billion.
- Eligible small businesses will also be able to carry back losses for the 2022/23 tax year and apply them against profits from any year from 1 July 2018.
Super
- The Downsizer Scheme age limit, whereby individuals could make a one-off contribution up to $300,000 after selling their home, has been reduced from 65 to 60.
- The ‘work test’ for those between 67 and 74 years old to make voluntary non-concessional and salary sacrificed contributions to superannuation has been removed.
- Flowing on from this, those aged 67-74 will be able to make non-concessional contributions (NCCs) using the bring forward rule – three years’ worth of NCCs.
- The government proposes to amend the Self-Managed Super Fund residency requirements making it easier for funds to maintain their complying status when members move overseas.
- There were no announcements in relation to extending the halving of the account-based pension drawdown, so we expect this reverts back to normal from 1 July 2021.
Other
- In response to the Royal Commission into Aged Care Quality and Safety, $17.7 billion has been allocated over five years to improve the aged care system.
- The Fist Home Super Saver Scheme has been increased from $30,000 to $50,000 of voluntary contributions, which is the amount an eligible person can have released from their super fund to purchase their first home.
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