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How Budget 2020 will affect you

Posted: 6 October 2020 7:32 pm
News

A woman juggling oranges

The complete guide to how tax changes and new regulations will hit your wallet.

Each year, the Federal Budget sets out spending priorities for the Australian government for the year ahead. The Budget traditionally happens in May, but the coronavirus pandemic delayed the 2020 announcement.

As usual, Finder is analysing all this year's Budget announcements to explain in jargon-free and unbiased terms what's actually being announced, what it will cost you and when the changes will happen. We'll keep updating as more detail emerges.

We're not here to debate whether a surplus will happen (difficult in any year, near-impossible in 2020 when uncertainty reigns) or to analyse big-spending infrastructure projects. We're looking at changes that immediately impact your salary, your savings, your expenses and your superannuation.

On top of COVID-19 uncertainty, changes announced in the Budget still have to pass through Parliament. The Coalition has a majority in the House of Representatives, but not in the Senate, so measures announced in the Budget may end up changing before they actually happen.

Tax changes: Rate cuts brought forward

What's changing?

Plans to cut tax rates that were originally intended to occur in 2022 are being brought forward, and will now be backdated apply from 1 July 2020. A one-off extension to the low-and-middle income tax offset (LMITO) is also being made for the 2020-2021 tax year.

Who will this affect?

Many taxpayers will see reductions. The cut-off for the lowest tax bracket (which has a tax rate of 19%) will rise from $37,000 to $45,000. The cut-off for the next bracket (rate 32%) will rise from $90,000 to $120,000. That means anyone earning above $37,000 can expect to see some reduction in the tax they pay.

Here's how the Budget predicts the changes will impact taxes paid overall for different groups:

What you earnTax reliefIndividuals impacted
Up to $37,000Up to $5102.4 million
$37,001 to $48,000Between $510 and $2,1601.8 million
$48,001 to $90,000Between $2,160 and $2,2954.6 million
$90,001 to $126,000Between $2,295 and $2,7451.5 million

When will this happen?

Subject to legislation being passed, this will be backdated to 1 July 2020. For most taxpayers, any excess tax you end up paying between that date and when the rules change will be refunded when you submit your 2020/2021 tax return. After the rules change, you'll pay slightly less tax and thus have a slightly larger pay packet each month.

FULL GUIDE: Budget 2020 income tax cuts: How much will you save?

Superannuation will follow you between jobs

What's changing?

Currently, every time you change jobs you need to provide information about your current superannuation fund. If you don't, your employer will sign you up to its default fund. The end result is that many Australians have multiple super accounts, which means they pay a lot of excess fees. Budget estimates suggest that 4.4 million Australians have multiple super accounts.

Changes to that approach will mean that your super account will be "stapled" to you, so you keep the same fund if you change employer. Any time you take up a new job, your new employer will get details of your current fund from the Australian Taxation Office.

Who will this affect?

All employees receive super contributions, so this will impact most working Australians.

When will this happen?

Assuming the legislation is passed, the changes will take effect from no later than 1 July 2021. One thing to note: the proposed new rules don't make any changes to actual fee structure, so it's worth comparing and making sure your current superannuation fund is a good fit for your needs, even if you don't have multiple funds.

10,000 new places in the First Home Loan Deposit Scheme

What's changing?

The First Home Loan Deposit Scheme, which helps first home buyers who only have a 5% deposit saved, has added an extra 10,000 places for this financial year.

Who will this affect?

Eligible buyers must be earning under $125,000 a year. Eligible property values vary by state.

When will this happen?

The change will be effective immediately. Check our complete guide to see if you're eligible and how the scheme works.

FULL GUIDE: First Home Loan Deposit Scheme

$500 in extra cash payments for welfare recipients

What's changing?

Two one-off payments to recipients of aged, carer, family or disability payments are planned. One $250 payment will be made in December this year, and another in April next year.

Who will this affect?

Recipients of the following pensions/welfare payments will be eligible:

  • age pension
  • disability support pension
  • carer payment
  • double orphan pension
  • carer allowance
  • family tax benefit or family tax benefit lump sum

The payment will also be made to holders of:

  • Commonwealth seniors health cards
  • pensioner concession cards
  • veteran cards

Note this payment doesn't apply to recipients of JobSeeker or JobKeeper.

When will this happen?

The payments are planned for December 2020 and April 2021. Based on what we know, they should be deposited automatically to the same bank account where your existing welfare payment goes.

Faster speeds on the NBN

Ahead of Budget night, plans to increase speeds with a $3.5 billion new rollout of local fibre networks were announced by government-backed NBN Co.

What's changing?

75% of households are projected to have access to Internet speeds up to 1GBps once the upgrade is completed. Note you'll have to pay extra to get those speeds.

Who will this affect?

Households with fibre to the node (FTTN), fibre to the curb (FTTC) and cable (HFC) connections. There are no changes planned for fibre to the premises (FTTP) households, which already have higher speeds and more reliable networks, or for regional satellite and fixed wireless customers.

When will this happen?

Don't expect any quick updates. NBN Co has to complete detailed planning of where rollouts might be possible and consult with industry on pricing, so we're not likely to see any changes until late 2021. If you need better broadband now, your best bet is to switch to a higher-speed tier and compare plans carefully before you do that.

FULL GUIDE: How the NBN plans to get faster

Changes to JobSeeker

What's changing?

From 25 September 2020, JobSeeker payments (made to unemployed people currently seeking work) have been cut.

Who will this affect?

The Coronavirus Supplement payment has been cut. For a single person with no dependants, it dropped from $550 a fortnight to $250.

When will this happen?

It has already kicked in.

FULL GUIDE: What the JobSeeker payment changes mean for you

Simpler rules for loans and credit cards

What's changing?

The government wants to cut down the amount of "responsible lending" checking that lenders need to do before granting home loans or personal loans or issuing credit cards.

Who will this affect?

Anyone who applies for a credit card or loan could be affected.

When will this happen?

Any legislation is likely to be contentious and challenged in Parliament. The government hopes for the changes to take effect from 1 March 2021.

Bottom line: Whatever the rules on how lenders have to check, applying for a loan or credit card you can't afford isn't a smart financial move. Make sure you understand what your repayments and potential fees will be before you sign up for any form of credit.

FULL GUIDE: How will proposed "simpler credit" rules affect Australian borrowers?

Don't wait for Budget changes to become law to improve your finances. Install the Finder app and find better alternatives right now for your credit cards, superannuation, mobile plans, energy bills and much more.

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