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Australia – Key Highlights from Budget 2020-2021

Australia – Key Highlights from Budget 2020-2021

This GMS Flash Alert covers key developments in Australia’s 2020-2021 Federal Budget, including cuts to personal income tax, an increase in the Low Income Tax Offset, changes to the superannuation regime, important amendments to the Fringe Benefits Tax regime, and measures to make Australia’s immigration system more attractive for global talent.

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The delayed Federal Budget 2020-2021 was delivered by the Australian government on 6 October 2020.

The Budget includes measures on personal income tax, the Fringe Benefits Tax regime, and immigration, as well as measures to stimulate hiring and broader societal support.

In this GMS Flash Alert we focus on the key measures impacting individuals and their employers.

WHY THIS MATTERS

The delayed 2020 Federal Budget sees multiple changes to existing tax rules with wide ranging impact to both employers and employees.  Middle- and high-income earners will receive an increase in take-home pay and there is a raft of support measures for business. 

Where an employee’s personal income tax burden is reduced, e.g., due to income tax cuts, the employer’s international assignment-related costs may also decrease.  The outcome depends on each individuals’ facts and circumstances, but withholding for most individuals will be impacted.

The Budget changes could affect international assignment cost projections and budgeting.  Payroll departments should be prepared to make necessary adjustments.

The Budget contains some of the most significant personal income tax changes in decades coupled with several new and complex support and compliance measures for business. 

Companies affected by the Budget measures should consider consulting with their qualified tax service providers or the People Services team at KPMG Australia (see the Contact Us section below) as they may wish to seek assistance with projecting take-home pay for employees, reviewing payroll withholding obligations, or availing of the new reliefs when creating new jobs and opportunities. 

Employees

Personal Income Tax Cuts

The government is bringing forward the personal income tax rate cuts previously scheduled to take effect from 1 July 2022 to 1 July 2020.  The cuts increase the upper threshold of the 19-percent tax bracket from $37,000 to $45,000, and the upper threshold of the 32.5 percent tax bracket from $90,000 to $120,000.  (All dollar figures expressed are Australian dollars.)

Relief for Low-Income Earners

The Budget provides further relief for low income earners through an increase to the Low Income Tax Offset from $445 to $700.

This relief applies from 1 July 2020, and will be available through 2020-21 personal income tax returns.  The current Low and Middle Income Tax Offset of up to $1,080 will remain in place for 2020-21.

KPMG NOTE

Individuals earning between $45,000 and $90,000 per year will be $1,080 dollars better off on an annual basis.  Those earning in excess of $120,000 per annum will receive an extra $2,430 annually. 

The retroactive start date will mean an immediate cash windfall for most employees in their next pay-packet as well as an increased likelihood of a refund at year end.

For individuals who also qualify for the Low and Middle Income Tax Offset further tax savings may apply.

Superannuation

An existing superannuation account will be “stapled” to a member to avoid the creation of a new account when that person changes his or her employment.  

KPMG NOTE

This should minimise administration fees and lost superannuation issues as a result of employees having multiple superannuation accounts.

Employers

Impact of Personal Income Tax Rate Changes

The tax rate changes noted above will also impact employer obligations. 

KPMG NOTE

Employers will need to make sure that their payroll systems have been updated so that the appropriate withholding is operated for all Australian employees.  A review will also be required to establish that withholding operated under hypothetical and shadow payroll arrangements is updated appropriately.  Further details of the new withholding tables have been released by the ATO: https://www.ato.gov.au/Rates/Tax-tables/#Importantinformationforthisyear.

Fringe Benefits Tax (FBT)

Key revisions to the FBT regime include relief for employers that provide “re-skilling” support to employees who have been, or will soon be, made redundant, a range of miscellaneous concessions to reduce FBT costs for small business, along with greater flexibility to immediately write off purchased assets.

  • Training provided to employees which is not sufficiently connected to their current role is subject to FBT for employers.  To support redeployment of individuals into new roles, a specific FBT exemption for all retraining costs provided by employers to redundant, or soon to be redundant, employees has been provided.  The government will also undertake consultation to consider allowing a personal income tax deduction where the costs of retraining are funded by the individual.
  • Businesses with a turnover of less than $50 million will have access to a number of small business concessions that are going to be introduced in three phases, which will impact a range of benefits including car parking and the provision of multiple work-related portable electronic devices such as phones or laptops.
  • Restrictions on the value of assets which businesses can write off in full have been lifted to allow un-capped write-off’s for qualifying new assets; all businesses with an annual turnover of $5 billion or less will be eligible to participate.

Societal Support

JobMaker Hiring Credit for Young Unemployed

Under the government's JobMaker Plan, employers not currently relying upon JobKeeper will receive a "Hiring Credit" for each additional new job that is created for an eligible employee over the 12-month period commencing from 7 October 2020.

Eligible employers will receive $200 per week for eligible employees aged 16 to 29 years, and $100 per week for eligible employees aged 30 to 35 years for up to 12 months from the date the new position is created.

Wage Subsidy for Apprentices and Trainees

Employers that hire new or returning apprentices and trainees will be eligible for a wage subsidy of up to 50 percent of an apprentice’s or trainee's wages, capped at $7,000 per quarter.  The subsidy runs from 5 October 2020 to 30 September 2021, and is capped at 100,000 places.

Immigration

With restrictions on travelling to Australia for persons who are neither Australian permanent residents or citizens, measures have been introduced to support migration levels with an initial focus on globally-talented individuals and businesses, and family applications for individuals currently physically in Australia on temporary visas.

Visa allocations for the Global Talent visa have been tripled to assist business sponsors in attracting high-calibre individuals with specialist skills to Australia with a pathway to Australian permanent residence. 

KPMG NOTE

The one-off increase in allocations for Family Stream visas is broadly seen as a recognition of the uncertainty and disruption faced by non-Australian citizens as a result of the COVID-19 pandemic. 

One notable development in respect of the Partner visa program for 2020-21 is the planned introduction of English-language testing for Partner visas.

FOOTNOTE

1  For the Budget speech and related documents, see: https://budget.gov.au/2020-21/content/overview.htm.

RELATED RESOURCE

For additional coverage of the budget by the KPMG International member firm in Australia, click here.    

AUD 1 = EUR 0.60

AUD 1 = USD 0.71

AUD 1 = GBP 0.546

AUD 1 = CNY 4.73

AUD 1 = JPY 74.65 

PEOPLE SERVICES IN AUSTRALIA

Dan Hodgson

Perth, Western Australia

Partner – People Services

Tel. +61 8 9278 2053

Direct Tel. +61 8 9278 2053

Mobile: +61 416 017 131

dghodgson@kpmg.com.au 

 

Mardi Heinrich

Melbourne, Victoria

Partner – Deals, Tax & Legal People Services

Tel. +61 3 9838 4348

Direct Tel. +61 3 9838 4348

Mobile: +61 410 602 993

meheinrich@kpmg.com.au

 

Ablean Saoud

Sydney, New South Wales

Partner – Deals, Tax & Legal People Services

Tel. +61 2 9335 8550

Direct Tel. +61 2 9335 8550

Mobile: +61 421 052 596

asaoud@kpmg.com.au

 

Hayley Lock

Brisbane, Queensland

Partner – People Services

Tel. +61 7 3434 9176 

Direct Tel. +61 7 3434 9176

Mobile: +61 477 764 638

hlock@kpmg.com.au

 

Jackie Shelton

Sydney, New South Wales

Partner – Deals, Tax & Legal

Tel. +61 2 9335 8511

Direct Tel. +61 2 9335 8511

Mobile: +61 477 764 638

hlock@kpmg.com.au

The information contained in this newsletter was submitted by the KPMG International member firm in Australia.

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