Like me, you will have had numerous summaries of the Federal Budget.
Need some help to get to sleep? then I refer you to The Tax Institute’s Budget Summary. It’s 35 pages and illustrates and what I have to deal with on an ongoing basis in evaluating legislation and tax law on your behalf. Such a thrill! However, on a serious note, if there is a specific area of the budget which you believe you need to know more about, the detail in this report is excellent.
For a more practical summary read this.
The budget spent a lot of money and it is therefore critical you understand HOW and WHERE.
A lot of the spend was aimed at small business and could affect you directly.
More importantly, the indirect effect on your business is the HOW AND WHERE, as it affects your customers.
A good example is the announcement of the spending on roads and infrastructure. Having nice new roads may save motor vehicle expenses in a minor way, or result in efficiency changes while you wait in traffic as works are underway or once completed the traffic moves quicker, BUT if you supply subcontractors undertaking the work the opportunity for your business to grow is huge.
So, what are the aspects of the budget to consider?
- There are individual tax savings of $1,080 per annum for lower taxable incomes (TI’s) and $2,430 for TI’s up to $120K.
- Hiring new staff for more than 20 hrs per week (from Job Seekers) will result in subsidies of $200 per week for 16 – 30 year old’s and $100 pw for 30-35 year old’s.
- New apprentices will entitle employers to a 50% wages subsidy
- The instant asset write off up to $150K per annum has been extended.
Note you should never make an asset investment to save 26%, however, do you supply businesses that will experience increased sales because of this extension?’
- R&D concessions have been increased.
- There is an ability to claw back of tax paid on prior years profits, if a company suffered or suffers a loss in 2020, 2021 or 2022 income years.
Note this is a great initiative, BUT only applies to companies and you must lose money in one of the above income years to be eligible.
- The Capital Gains Tax on Granny flats has been removed.
- FBT on Car parking has been removed for small business.
- The infrastructure spend is projected at $10 billion per year for the next 10 years and 1 billion on roads. There is also a large spend on NBN upgrades and digital development infrastructure.
The budget was announced as a means of motivating hiring, investment and spending which would lead to a more confident business community on the back of a very tuff 2020.
Aussies now face a dilemma in that the above budget actions will deliver business savings. For the strategy to work, we need to spend the savings not horde them.
If you take my point, is investing in a public company who will benefit enormously from the massive 10 billion per annum infrastructure spend going to help?
To answer this question, you would have to think the answer NO! Certainly not in the immediate time frame. However, if such a strategy was successful, the profit made in the next 12 months (and thereafter for 10 years) would then allow for greater spending and in the long run, smart business decisions made now will eventually produce a stronger economy.
It all comes down to planning and how you go about making smart decisions and that’s what we want to help with.
We at Connolly & Associates will keep you posted as information and strategies unfold.