The 2020-21 Federal Budget has been announced.
We have summarised below the key changes that may be specifically relevant to you as a Doctor.
The COVID-19 pandemic and recession have underpinned policy direction, as anticipated. The Budget was definitely aimed at business and creating jobs, rather than individuals already in jobs.
Please note that as with every Budget, the government announcements outlined are proposals only and need to successfully pass through Parliament before becoming law. Announcements may be subject to change during this process.
The key announcements in the Budget that may be relevant to you are:
Lower Income Tax
The major benefit contained in the Federal Budget for individuals was income tax cuts.
These tax cuts will be back-dated to begin on 1 July 2020 and extend the upper threshold for the 19 percent tax rate from $37,000 to $45,000 and the 32.5% rate upper threshold from $90,000 to $120,000.
The table below illustrates the tax savings for example taxable incomes:
|Taxable income||Current tax payable||Proposed tax payable||Tax saving|
The proposed bring-forward of the tax cuts are largest for those with annual incomes of $120,000 and above.
However, Doctors still in training, and lower earning partners and family members should also benefit if earning more than $37,000 per annum.
You may wish to consider utilising your tax savings to boost your wealth creation or reduce your debt.
Tax Offsets – possible extra tax savings for low to middle income earners
The low income tax offset (LITO) — essentially a lump sum payment to you via your tax return – for incomes below $37,000 will increase from $445 to $700 from 1 July 2020.
The low to middle income tax offset (LMITO) will also be retained through to 30 June 2021 with tax relief of:
- $1,080 for single earners
- $2,160 for dual income families
The full tax relief of $1,080 is available to individuals with taxable income between $48,000 and $90,000. Taxpayers with income below this level will be eligible for an offset of between $255 and $1,080.
Doctors who are still training, and lower earning partners and family members may benefit from one or both of these.
Again, you may wish to consider utilising any such tax savings to boost your wealth creation or reduce your debt.
Further extension to the instant asset write-off
Small businesses, including most self-employed Doctors, will be able to deduct the full cost of eligible capital assets (no cap) incurred between 7 October 2020 and 30 June 2022.
Eligible capital assets include:
- New depreciable assets e.g. car, medical or computer equipment
- The cost of improvements to existing eligible assets
- Second-hand assets e.g. car or medical equipment
Please contact us if you would like more information about this initiative and what it may mean for you personally.
Health – Overview of Some Key Changes
The proposed Budget measures include:
- Temporary COVID-related extensions to telehealth Medicare items
- Temporary COVID-related extensions to the temporary increase in GP bulk billing incentives
- Listing more medicines on the PBS to help with the treatment of specific cancers and other particular medical conditions.
For Doctors in specific areas of medicine, this should mean better patient access to care, supporting remuneration for GPs, Psychiatrists and possibly other specialities, and perhaps greater demand for particular medical services.
The Budget increases the government’s previously announced infrastructure spending commitments slightly with a focus on additional funding for transport infrastructure to reduce congestion, improve road safety and provide faster commuter and freight connections between cities and regions.
This may be good news for property investors who have well-located properties near new key infrastructure.
Improving the super industry and performance
The government will direct employers to pay super into existing accounts (as advised by the ATO) to avoid opening a new account with a new super fund when you start a new job.
This will avoid workers unknowingly accumulating multiple super accounts.
The government will also take measures to improve the accountability and transparency of super funds.
Most Doctors working in the public system are offered a default industry super fund option, such as QSuper, with typically low fees and reasonable performance, or have a self-managed super fund. As such, this should not have a major impact for most Doctors and we of course will work with you throughout your career to optimise your superannuation arrangements in terms of fees and performance.
However, this may assist minimise multiple super accounts being created unnecessarily for some and we completely agree with the intention of this measure to simplify super and support performance net-of-fees for all Australians and their super.
With the proposed changes requiring Parliament approval, all of these changes remain to be legislated.
Overall though, the personal income tax cuts, business employment incentives and business investment incentives should be positive for the Australian sharemarket generally, albeit favouring some sectors more so than others.
These budgetary measures, historically low interest rates and the proposed relaxation of mortgage lending rules are also expected to benefit well-located, investment-grade properties.
As with any change in legislation, there are always strategies to make the most of the changes, and even emerge in a better financial position than before.
Please feel free to contact us if you have any questions or would like to discuss how these changes will affect you personally.