The Government has released their budget for 2021. There are not a lot of new initiatives in the budget, but a number of measures will provide extra money to taxpayers.
Personal Income Tax Cuts
The main measure is to bring forward phase 2 of tax cuts that were scheduled for 2023. The impact on your tax bill of bringing forward the tax cuts is summarised in the table below:
For employees, the savings for 2020/21 should start to be paid to you in instalments as part of your normal pay through a reduction in PAYG Withholding once the legislation approving the cuts is passed.
You will note there is only a small cut or no cut at all for people with taxable income under $100,000 in 2021/22. The reason for this is that people on these incomes received a tax cut in the first phase of tax cuts in 2019. There is a larger saving in 2020/21 as the Government decided to continue the Low and Middle Income Earners Offset for that year only. The third phase of tax cuts that has been legislated to commence in 2025 is also aimed at higher earners.
While there is not much tax savings showing for people who earn under $100,000 in 2021/22 there will be a change in the timing of payments. This is because the tax cuts delivered in 2019 were in the form of an end of year offset paid through your Tax Return rather than as a reduction in PAYG withheld from your wage. As an example, an employee earning between $48,000 and $90,000 has been receiving an offset of $1,080 as part of their end of year tax return in recent years. This will stop in 2022 and will instead be received as part of your wage during the year at a rate of approximately $20 per week.
$250 cash payments
The Government will pay two $250 tax exempt support payments to recipients of the following:
- Age Pension
- Disability Support Pension
- Carer Payment
- Family Tax Benefit
- Carer Allowance
- Pensioner concession card holders
- Commonwealth Seniors Health Card holders
- eligible Veterans Affairs payment recipients
Payments will be made to eligible recipients in November 2020 and early 2021.
JobMaker Hiring Credit
The other major measure announced was an incentive for businesses to employ young unemployed people. The JobMaker Hiring Credit provides eligible employers $200 per week for up to a year (up to $10,400) for new employees aged 16 to 29 years who were on JobSeeker in one of the three months prior to being hired and who work on average 20 hours or more for the business. The incentive drops to $100 per week for new employees aged 30 to 35 years. The employer must also be able to show that the job is an additional job created from the 7th of October 2020. For more details please read our article on the JobMaker Hiring Credit scheme.