This year’s budget is arguably a once in a lifetime level of spending and stimulus.
The federal government has sought to plug the economic hole by bringing forward tax cuts, supplements to various welfare payments, and a number of smaller schemes to encourage building, hiring of apprentices, and boosting manufacturing. These all add up to an unprecedented boost in government spending.
The government's decision to bring forward planned tax cuts worth about $12.5 billion over the next 12 months represents a big win for a forecast 11.5 million taxpayers. The 19% tax bracket threshold will rise from $37,000 to $45,000 under the government's plan, while the 32.5% bracket will go from $90,000 to $120,000. The one-off low and middle income tax offset will stay in place for another year. When combined the measures will deliver individuals up to $2745 in tax benefits.
All of this was designed to help set Australia up for a bounce in economic growth and employment that involves more than just waiting for the pandemic to end.
But the real winners from the budget were small businesses, with the expanded asset write-off scheme and JobMaker hiring credits all likely to have a positive effect on business confidence.
However the big one is the introduction of the carry-back provision. This means that businesses battered by the coronavirus pandemic can go back to previous financial years to claim back some of the tax paid pre-COVID, to offset losses incurred during the current recession. For more on how it works, catch up on our discussion on Money News last Monday.
In my opinion, reintroducing the carry-back provision will protect hundreds of thousands of Australians employed by businesses which will register a loss this financial year. The real test will be how they work in practice over the coming year to support the restoration of small business jobs lost over the past nine months.
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