Weekly Digest – 14 October 2020
Welcome back to our Weekly Digest. We hope you and your family are safe and doing well. Read on for this week’s update.
Proposed Superannuation Reform Measures
The Government has announced that it will spend $159.6 million over the next four years to implement a number of reforms to the superannuation system that will save fund members $18 billion in fees and other costs between now and 2030. The key elements of these reforms include:
- From 1 July 2021, when a person changes jobs, their super account will be ‘stapled’ automatically to them. At the time of starting a new job, and unless a member decides otherwise, their employer will pay superannuation contributions into their existing ‘stapled’ fund.
- By 1 July 2021, the Government will develop a new interactive online ‘YourSuper’ comparison tool, which will be administered by the ATO, to allow people to research and select a MySuper fund to manage their super savings.
- MySuper products and other trustee-directed superannuation products will be subject to an annual objective performance test, based on net investment returns. A fund determined to be underperforming will be required to notify its members and provide them with information and tools to switch to a better performing fund
The government has not yet announced any change to the already legislated SG increases, which are due to see the SG rate increase from the current 9.5% to 10% from 1 July 2021, with further gradual increases to 12% by 2025.
Financials, Tech Stocks Drive Australian Market Higher
The Australian market settled higher on Tuesday for seven consecutive sessions, as financials rose on economic optimism and technology stocks traded higher. In the previous week, the Australian Government pledged billions in tax cuts and measures to boost jobs, which was accommodative for the economy.
Australians to Receive Tax Cuts
The Australian Government approved $17.8 billion in personal tax cuts, quickly pushing through measures announced last week to support the country’s economy.
More than 11 million Australians and 1 million businesses will begin receiving tax relief within weeks after the measures have been approved.
Under the new tax package, people earning $48,000 to $90,000 will gain an extra $1,080 in 2020-21 from a one-off extension of the low and middle-income tax offset. Meanwhile, those earning more than $120,000 will have a permanent cut of $2,430 in 2020-21 and beyond.
If you need help with your taxes, get in touch with us so we can sort it out for you.
Federal Budget 2020 Released
The Federal Budget was released earlier this week. Here’s a quick rundown of the key points:
- This budget is based on economic assumptions including that there will be a COVID-19 vaccine rolled out by the end of 2021.
- Asset write off – businesses that make new investments will be able to write off the entire cost in one year, rather than having the asset depreciate over several years. Businesses with a turnover of up to $5 billion will be able to write off the full value of any eligible asset they purchase up to $150,000.
- Cash payments for pensioners. Tax-free payments of $250 will be made to pensioners and others on government support, including those on a Disability Support Pension, Carer Allowance. Find the full list here.
- COVID-19 health measures, money for aged care and NDIS. As expected, the Government is putting billions towards COVID-19 vaccines, mainly the University of Oxford and University of Queensland trials.
- Mental health support increases – the number of Medicare-funded psychological services doubled from 10 to 20. More announcements are set to come.
- A $240 million Women’s Economic Security Statement was unveiled in the budget.
- Funding for Infrastructure and Construction. $7.5 billion has been announced for national transport infrastructure, aimed at boosting state and territory projects that are currently in the planning phase. Also, the $688 million HomeBuilder scheme gives cash grants for people to renovate or build new homes and builders will benefit from extra support for first home buyers.
- Manufacturing- $1.3 billion has been allocated to boosting Australia’s manufacturing sector and securing supply lines.
- No changes to JobKeeper or JobSeeker.
The Government will bring forward its planned tax cuts meaning millions of Australians will have more money in their pockets, potentially from the end of October. These tax cuts were scheduled to start in July 2022 but will be brought forward and backdated to July this year.
- Under the plan, the upper limit of the 19% personal income tax bracket will rise from $37,000 to $45,000 and the 32.5% marginal tax rate upper threshold will lift from $90,000 to $120,000.
- The tax plan means people who earn between $45,000 and $90,000 will take home an additional $1,080 this financial year.
- Workers who earn more than $90,000 will take home up to $2,565 extra, with people earning more than $120,000 receiving the maximum benefit.
- The low and middle-income tax offset, currently worth $255 for a worker on $37,000 and $1,080 for those earning between $48,001 and $90,000, will also remain.
The Government hopes Australians will spend the additional cash, to help offset the economic activity lost this year.
JobMaker Hiring Credit scheme
While there are no changes to the JobKeeper scheme set to send in March 2021, a fresh wage subsidy program called the JobMaker Hiring Credit has been announced.
The JobMaker Hiring Credit will partially subsidise the wages of young employees who are hired from 7th October 2020. As always, there are some conditions for both employers and employees to meet.
Employers will be able to claim $200 each week for every employee hired after 7th October 2020 aged between 16 and 29, and $100 each week for every employee aged between 30 and 35.
NSW to Ease Restrictions
New South Wales announced that from 16 October, venues that offer outdoor dining will be allowed to have double the number of patrons outside. Australia’s federal government hopes easing state restrictions will help revive the country’s ailing economy.
$800m Digital Business Plan to Drive Economic Recovery
The Australian Government has announced a Digital Business plan to enable businesses to take advantage of digital technologies to grow their businesses and create jobs in the wake of COVID-19. PM Scott Morrison and Treasurer Josh Frydenberg announced the almost $800 million scheme on Tuesday that will facilitate doing more business online in a post-pandemic world.
Under the plan, the rollout of Australia’s 5G network will be accelerated, the digital capacity of the agriculture, manufacturing, mining, logistics and financial services will be boosted, and Australians will be able to start a new business in 15 minutes using online government services.
If you need our expert advice on how you can start a business or pivot to adapt to the crisis, don’t hesitate to message us.
Major Overhaul to Bankruptcy Laws
After the major changes to the JobSeeker and JobKeeper programs, Australia’s bankruptcy laws have been overhauled, throwing a lifeline to struggling businesses amid the COVID-19 crisis.
Under the proposed changes, businesses with liabilities of less than $1 million will be able to keep operating while they come up with a debt restructuring plan, rather than be placed in the hands of administrators.
The new rules which will become effective from 1 January 2021 follows the government’s decision earlier this month to extend its temporary insolvency and bankruptcy protection rules until the end of 2020.
Supporting Apprentices and Trainees Wage Subsidy Extended
The Supporting Apprentices and Trainees wage subsidy has been expanded and extended to include medium-sized businesses who had an eligible apprentice in place from 1 July 2020.
Eligible employers will receive a wage subsidy of up to 50% of the wages paid until 31 March 2021 worth up to $7,000 per quarter, per eligible apprentice or trainee, to manage their cash flow challenges. Subsidies will also be available to any new employer who re-engages an eligible apprentice that was displaced by an eligible small- or medium-sized business.
This may be of particular interest to employers who are not eligible for the JobKeeper extension. For professional assistance in applying for this wage subsidy or any other funding assistance, feel free to contact us.
Business Resilience Package for Victorian Businesses
The Victorian government is investing $3 billion in cash grants, tax relief, and cashflow support to aid businesses hit by the tight restrictions and help them prepare for COVID Normal. The types of support included in this package are divided into three categories: Business Support, Business Adaptation, and Waivers and Deferrals.
Included in Business Support is the third round of the Business Support Fund for small- and medium-sized business ($822 million), with applications opening on 18 September 2020.
Meanwhile, Business Adaptation involves funding, tools, and resources to help businesses adapt to COVID Normal. Tax and cashflow support amounting to $1.8 billion will be provided by the government under the Waivers and Deferrals scheme.
For a detailed rundown of the inclusions of the Business Resilience Package, click here. Let us help you assess your eligibility and gain access to government support! Get in touch with us so we can schedule a consultation.
Sole Trader Support Fund
The Victorian Government has announced the Sole Trader Support Fund for eligible non-employing businesses affected by COVID-19 restrictions. Under this scheme, sole traders will receive a grant of $3,000.
Grant applications will open in the coming days and the full list of eligibility criteria will be published soon. We will keep you updated as soon as more information is available.
Government-backed COVID-19 Loans Extended
The government is extending its small business COVID-19 loans scheme until June 2021. If you need help to access these loans or you want to find out if you are eligible, don’t hesitate to drop us a message.
Government Launches Business Continuity Website to Support Businesses Amid COVID-19
The Australian Government has launched the Australian Business Continuity website to support businesses with staff working remotely amid the pandemic.
The site provides free practical tools for remote communications, collaboration, workforce management, and video conferencing, as well as advice on how to best use teleworking services.
COVID-19’s Potential Impact on GDP
Prior to COVID-19, models of what could happen during a pandemic overstated the possible global death toll, but understated the potential hit to GDP. But as a series in The Economist explains, our current pandemic may have lasting impact.
The impacts of shutting down schools may persist for decades. Governments around the world are issuing debt at levels never before seen to finance support for workers and businesses. The virus continues to spread, but the extent of impact in poorer countries remains largely invisible. Rapid development of vaccines mean that they may be available in 2021, but their safety and efficacy are so far largely unknown. The shift to an online world for retail, work, entertainment, and education will likely influence us for years to come. The question we all have to answer is whether those impacts will result in meaningful changes that help to elevate all or that exacerbate divisions and inequalities.
We sincerely hope for positive changes that help to make this a better world!
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