Federal budget 2020: Something for everyone but ‘crisis’ tax cuts take spotlight

The budget offers something to Australians of all ages but it’s sooner-rather-than-later tax cuts for 11 million salary earners that will take centre stage.

Prime Minister Scott Morrison (L) watches as Treasurer Josh Frydenberg reacts after the budget delivery in the House of Representatives. Picture: Getty Images

The budget offers something to Australians of all ages but in this crisis year it’s sooner-than-later tax cuts for 11 million salary earners along with comprehensive job support incentives that will take centre stage.

In fact, if you put all the budget measures together with a string of well-flagged initiatives announced over the past few days, this is the ideal time to be a young securely employed salary earner ready to start your superannuation plans or to buy your first home.

In contrast, it’s a demanding time to be unemployed – or underemployed — so younger people who have been hardest hit economically in the COVID crisis receive a wave of indirect support with the JobMaker hiring credit plan emerging as the latest in a range of schemes encouraging employers to hire or rehire.

Aimed at 16-to-35-year-olds, the JobMaker credit offers employers between $200 and $300 a week to create jobs for those on JobSeeker

The arrival of JobMaker sees the government switch its emphasis from sustaining the unemployed towards encouraging employment in every manner from incentives for apprentices to tax-deductible professional study costs.

Younger people also get a major support for their lifetime savings plans with a long overdue reform in the superannuation area, which is the effective termination of the so-called super default scheme where young people could get automatically defaulted into the super fund used by each employer they encountered.

As a result a 28-year-old on their third job might have three different super funds, invariably union-linked industry funds.

According to the government, the “your future, your super” package will allow your superannuation to follow you from employer to employer, it will make it easier to choose a better fund and – importantly — hold funds to account for poor performance.

At its worst, the current system can default workers into the funds that are unable to even match the super sector’s average returns.

But the hip-pocket news for salary earners of every age is the accelerated change in personal tax cuts, which were due to start in 2022 and will now arrive immediately because they are backdated to July 1 this year. This is the measure that is made for middle Australia and will target the bulk of workers and salary earners.

In effect the 19 per cent tax band now cuts in at $45,000 not $37,000, and the 32.5 per cent tax rate cuts in at $120,000 rather than $90,000.

Put simply, it means anyone in this category will get between $1000 and $2500 a year saved on tax; that money is expected to start flowing very soon and will be divided out over the rest of the year.

Home hunters and first-home buyers are also high in the mix with a range of government programs: the budget highlights the full funding for the HomeBuilder program, which allows renovators or those building a new home to get a grant of up to $25,000.

In addition, the government has effectively released another 10,000 places in the First Home Loan Deposit Scheme where you may only need a 5 per cent deposit to buy a house.

On top of that there is also the First Home Super Saver scheme where you can use up to $30,000 of your voluntary super contributions to put a deposit on a house.

Putting the three “Home” schemes together, you would think that just about anyone trying to buy a first home or to build a new house can get a grant of some sort — and that’s just at the federal level.

Of course, there are those who say grants just push up prices, and they do … but they also lift the proportion of first-home buyers in the wider market.

Those looking to buy a home are often trying to find childcare at the same time; this group also gets some specific assistance where there has been split-ups among parents to ensure that childcare commitments are not loaded on one partner.

Older Australians facing the burden of navigating the troubled aged-care system will also be relieved that the government has widened its commitment to home-based aged care for the second year in a row – the budget allows for a hefty $746m over four years aimed at aged-care and home-care providers

Separately, the government has added a welcome exemption to capital gains tax that will make it a lot more attractive to build so-called “granny flats” on the property of the primary residence.

The new arrangements will make granny flats exempt from capital gains tax risk when the family home in which it sits is sold – the measure is expected to help standardise written and formal agreements for these arrangements.

For older Australians, pensioners will again be among the recipients of a one-off payment from the government, which will be $250. The payment will go out twice in the coming year.