The Federal Treasurer brought down the annual Federal Budget for 2020/21 on 6 October with most of the key moves pre-empted in pre-budget announcements. This budget was promoted as the most important in 100 years as it needed to address the economic impacts of a once in a 100 year pandemic. It was a big-spending announcement and big turnaround from the 2019/20 budget where seeking a surplus was the Morrison Government’s key objective.
Jobs creation and a business-driven recovery clearly framed the strategy as was stressed both in the budget speech and in the post-budget press conferences by Government ministers. Some say it was the right budget for the time, others say it didn’t go far enough and many people missed out. We’ll leave that debate to others. As always,
As with most budgets, this one covers a wide range of issues, industries and sectors of the community. At Jade Boat Loans, we are primarily focussed on Government initiatives that may make it easier for our customers and potential customers to buy the boat of their dreams.
When sourcing you the cheapest interest boat loan we’re working only in your best interests. In breaking down the Federal Budget we’re following the same approach. We’ve selected what we think are the aspects that may make it easier for you to buy a boat. Time to talk ‘boating on a budget’!
Personal Tax Relief
The two words that most everyone wants to hear at budget time is ‘tax cuts’. For many Australians, this budget delivers on that count with personal income tax cuts across a number of income brackets.
These tax cuts will be implemented by a change to the threshold for two key tax brackets:-
- The 19% tax bracket currently has a $37,000 threshold. That will be lifted to $45,000.
- The 32.5% tax bracket currently cuts off at $90,000 and that is set to rise to $120,000.
These changes are actually Stage 2 of the Government’s Income Tax Plan which was introduced in the 2018 Budget. Stage 1 was started last year with the low income tax offset and low and middle income tax offset. These offsets will remain in place for the 2020/21 tax year and can represent a refund of up to $1080. The offset is scaled according to income level.
The offset is received as part of an individual’s tax return so, if eligible, you’ll have to wait until after you lodge your tax return, after 1 July 2021, to receive your entitlement.
The change in thresholds however, offer more immediate relief. Of significance is that this Stage 2 has been brought forward by 2 years. It was not originally planned to be implemented until 2022. But the need to get money into consumers’ hands to spend and stimulate the economy is one of the key reasons for bringing forward these tax cuts.
Back-Dating Tax Cuts
The other key factor to note is that this change is to be back-dated to start from 1 July 2020. Three months earlier than the budget announcement. Under normal circumstances the Treasurer would announce the annual budget in May each year to allow for measures to pass through Parliament and be in place by the start of that financial year, 1 July.
However, due to the unstable environment earlier in the year due to COVID-19, the budget was pushed back to October. So effectively it is out of sync with financial year activities but is better-framed to deal with the current economic position.
Back-dating the tax cuts to the start of the financial year will involve the ATO issuing revised tax schedules, software companies making the necessary updates to their software systems and businesses amending their payroll systems to the new tax thresholds.
This is estimated to all be completed by November 2020. So around that time, eligible workers should start receiving a little extra in their take-home pay. As for the prior 3 months which was calculated and tax paid at the higher rate, this will be accounted for in your annual tax return and refunded after you lodge your 2020/21 income tax return.
Streamlining Consumer Credit
Another aspect of the budget that affects future boat loans is the Government’s announcement of proposed changes to the consumer credit laws. The current arrangements are viewed by some as including too many barriers to consumers and small businesses accessing credit. Duplication in the processes with the banks especially having to meet both APRA and ASIC regulations has also been identified as slowing the flow of credit.
In order to ease the flow of credit to stimulate the economy, changes to the consumer credit laws are due to come into effect in April 2021. We recommend you read our detailed article on this topic. These changes won’t affect any boat loans that you apply for prior to April 2021.
Getting a Boat Loan on Your Budget
So that’s a quick snapshot of the Federal Budget as we see it in relation to boat loans. If the tax cuts make owning a boat with a Jade boat loan a distinct possibility, contact us to request a quote that meets your budget.
To discuss a boat loan quote to suit your personal budget, contact Jade Boat Loans 1300 000 003
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