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Implications for Australia’s workforce

 

The 2020 Budget casts a wide net that both builds on previous initiatives and introduces new programs that aim to protect jobs by stabilising today’s workforce and reinforcing the viability of the workforce of the future. 

Australian Federal Budget

Mercer’s Perspective

 

Significant investment in public infrastructure across all states and territories, along with support for residential housing, roads and community infrastructure projects will create and/or support ongoing direct employment across a number of sectors over an extended timeframe. Critical skills that will be required to deliver these projects will be developed through programs targeting the creation of new apprenticeships. Also of significant note, given the proportionally higher impact of COVID-19 on women’s employment, is the second Women’s Economic Security Package.

 

While the above measures will provide indirect benefits over time, bringing forward changes to personal income tax will have a much more direct impact on low and middle income earners as it effectively increases their take-home pay. The significance of these changes to the tax regime cannot be understated, particularly given many employers’ ability to provide a remuneration uplift via either CPI or annual merit increases has been severely hampered as a result of the impact of COVID-19 on company revenue.

 

 

Implications for employers

  • JobMaker Hiring Credit$4 billion will be provided over three years to accelerate employment growth by supporting organisations to take on additional employees through a hiring credit. The JobMaker Hiring Credit will be available to eligible employers over 12 months from 7 October 2020 for each additional new job they create for an eligible employee. This will involve a payment of $200 per week for hiring an eligible employee aged 16 to 29 years or $100 per week for hiring an eligible employee aged 30 to 35 years. This will be available for up to 12 months from the date of employment with a maximum amount of $10,400 per additional new position created.

To be eligible, the employee will need to have worked for a minimum of 20 hours per week, averaged over a quarter, and received the JobSeeker Payment, Youth Allowance (other) or Parenting Payment for at least one month out of the three months prior to when they are hired.

 

  • Fringe Benefits Tax — exemption to support retraining and reskillingAn exemption will be introduced to the 47% fringe benefits tax (FBT) for employer provided retraining and reskilling benefits provided to redundant (or soon to be redundant employees), where the benefits may not be related to their current employment. This measure applies from announcement.

 

Implications for individuals

  • Changes to Personal Income TaxThe government will bring forward the second stage of its Personal Income Tax Plan by two years to 1 July 2020. The changes will provide immediate tax relief to individuals.
    • The top threshold of the 19% personal income tax bracket will increase from $37,000 to $45,000. 
    • The low income tax offset (LITO) will increase from $445 to $700. The increased LITO will be withdrawn at a rate of 5 cents per dollar between taxable incomes of $37,500 and $45,000. The LITO will then be withdrawn at a rate of 1.5 cents per dollar between taxable incomes of $45,000 and $66,667. 
    • The top threshold of the 32.5% personal income tax bracket will increase from $90,000 to $120,000. 
    • The low and middle income tax offset (LMITO) will be retained for 2020-21 (this was originally to be removed with the commencement of Stage two of the Personal Income Tax Plan). Low-and middle-income earners will receive a one-off additional benefit of up to $1,080 from the LMITO.

 

  • Vocational Education & Training / JobTrainer FundThe government will provide $586.8 million over five years from 2019-20 (including $3.7 million in capital funding) to ensure the vocational education and training (VET) system can play a critical role in supporting Australia's future growth and prosperity, including the economic recovery from COVID-19. This includes establishing a national JobTrainer Fund to support job seekers to reskill and upskill, and ensure that all school-leavers have access to training.

 

  • Supporting apprentices and trainees: $2.8 billion will be provided over five years from 2019-20 (including $4.4 million in capital funding over two years from 2019-20) to keep apprentices and trainees employed. The Supporting Apprentices and Trainees (SAT) wage subsidy reimburses eligible businesses up to 50% of an apprentice or trainee's wages. Subsidies are capped at $7,000 per quarter per eligible apprentice/trainee. A wage subsidy is also available to eligible Group Training Organisations where the Host Employer of any size is receiving the JobKeeper payment and retains their apprentice or trainee.

 

  • Second Women’s Economic Security Package: $231 million will be provide over four years from 2020-21 for the Second Women’s Economic Security Package. The package will include:
    • $90.3 million over three years from 2020-21 for concessional work test arrangements for Paid Parental Leave in response to COVID-19.
    • $47.9 million over four years from 2020-21 to increase grants for the Women’s Leadership and Development Program.
    • $35.9 million over five years from 2020-21 to increase the number of co-funded grants to women-founded start-ups under the Boosting Female Founders Initiative and to provide access to expert mentoring and advice for women entrepreneurs.
    • $25.1 million over five years from 2020-21 (including $3.0 million in 2024-25) to establish a Women in Science, Technology, Engineering and Mathematics (STEM) Industry Cadetship program to support 500 women working in STEM industries to complete an Advanced Diploma through a combination of study and work-integrated learning experiences.

 

  • Consultation regarding deductions for non-employment related education and trainingThe government will consult on allowing individuals to deduct education and training expenses they incur themselves where the expense is not related to their current employment in order to determine whether deductions should also be targeted to future employment and skills needs.

 

 

 

 

 

 

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