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Xero – Gold Partner

Federal Budget 2020: Kristen Buik’s Recap

By | October 7, 2020

The 2020 budget has been handed down and Altitude Advisory Partner, Kristen Buik says it was no surprise to anyone that the focus was jobs.

The government’s broader economic plan to be a much more self-sufficient country, looking afterlives and livelihoods of Australians, has a renewed focus on business in all regions.

There were few surprises in the announcement, it appeared to be a budget of least resistance, almost guaranteed to be legislated without argument by the opposition.

We know to have a strong economy we need to have unemployment at less than 6% and as a result, the budget allows for targeted measures designed to get people working, businesses growing and thus stimulating the economy.

Debt is as cheap as it has been since Federation, and experts agree there is no concern there, even though by 2031 we will be a little over 1 trillion dollars in debt which will be 55% of GDP.

The Headline Acts

  • Personal tax cuts – most of our clients stand to benefit individually by almost $3k per year
  • Uncapped instant asset write off for businesses turning over less than $50 Million
  • Employment incentives – a transitioning measure from the previous measures that are ending in March
  • Small business start-up tax breaks
  • FBT & R&D – simplification of the system with respect to compliance, sorely needed
  • Corporate residency for companies is on the cards too

Personally, when I listened to the budget, I was also listening for what wasn’t said. The entire budget is predicated on a successful vaccine for Covid-19 being found and administered. There is an assumption that our internal borders will be open by Christmas this year and internationally by the end of 2021. It’s also built on the premise that there is no other global crisis happening simultaneously to Covid-19. These assumptions mean that we are looking at a budget that may well be a best-case scenario given the fragile foundations.

There is general agreement amongst experts and analysts that Australia requires broader tax reform as a matter of urgency. We currently have a large disparity in tax rates between the small/medium business company tax rate at 26% and the highest individual marginal tax rate at 45% (plus Medicare) – which means small businesses spend a lot of money figuring out ways to maximise their tax effect.

In broader terms we are anticipating that borrowing costs will drop further for Australians in the short term, the US dollar will continue to dip over the next 18 months and in turn the Aussie dollar will continue to rise.

Make no mistake, these are unprecedented times, we are currently experiencing the largest peacetime economic contraction since the 1930s. A budget is just that, a budget, the proof really is in the pudding.

For more information or if you have any questions about your personal situation, contact our office on (08) 8172 1444 or email our friendly team today!

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