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[av_heading heading=’The News Brief_20201014′ tag=’h1′ style=’blockquote modern-quote modern-centered’ subheading_active=’subheading_below’ show_icon=” icon=’ue800′ font=” size=’6vw’ av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” subheading_size=’20’ av-medium-font-size=” av-small-font-size=” av-mini-font-size=” icon_size=” av-medium-font-size-1=” av-small-font-size-1=” av-mini-font-size-1=” color=’custom-color-heading’ custom_font=’#000000′ icon_color=” margin=’0′ margin_sync=’true’ padding=’0′ icon_padding=’10’ link=’manually,http://’ link_target=” id=” custom_class=” av_uid=’av-kg7pctp7′ admin_preview_bg=’rgb(34, 34, 34)’][/av_heading]

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[av_heading heading=’Tax cuts set to flow ‘within a few days or weeks’’ tag=’h1′ style=” subheading_active=” show_icon=” icon=’ue800′ font=” size=” av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” subheading_size=’15’ av-medium-font-size=” av-small-font-size=” av-mini-font-size=” icon_size=” av-medium-font-size-1=” av-small-font-size-1=” av-mini-font-size-1=” color=” custom_font=” icon_color=” margin=” margin_sync=’true’ padding=’10’ icon_padding=’10’ link=’manually,http://’ link_target=” id=” custom_class=” av_uid=’av-kg7pd3hx’ admin_preview_bg=”][/av_heading]

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With the Morrison government’s stage 2 income tax cuts sailing through Parliament last week, the ATO now anticipates that it will be able to publish updated tax withholding schedules over the next few days.

Despite the tax cuts being backdated to 1 July this year, the Tax Office has confirmed that it will not adjust withholding schedules to account for any over-withheld amounts that individuals have accrued since the start of the financial year.

Instead, this over-withheld amount will be factored into the tax assessment of an individual at the end of the income year.

“Following this, employers will need to make adjustments in their payroll processes and systems in order for the tax cuts to be reflected in people’s take-home pay. The complexity of implementing these adjustments may be different for each employer,” the ATO said.

“This means that some people may notice the tax cuts reflected in their take-home pay within a few days or weeks, while for others it may be longer.

“Any ‘over-withholding’ that occurred prior to the employer updating their payroll software and processes will be included in the tax assessment of the employee at the end of the income year.”

The Institute of Public Accountants chief executive Andrew Conway believes non-salary and wage earners can immediately take advantage of the tax cuts by varying their September quarter instalment.

“Taxpayers earning income outside of wages and salaries can immediately take advantage of stage 2 tax cuts by varying down their quarterly instalment in the September BAS which is due on 28 October 2020,” Mr Conway said.

“Small-business entrepreneurs are mostly unincorporated entities and therefore are also beneficiaries of the stage 2 tax cuts. We are encouraging all our members to vary down PAYG to take advantage of this initiative.”
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[av_heading heading=’Vic property values defy gloomy predictions’ tag=’h1′ style=” subheading_active=” show_icon=” icon=’ue800′ font=” size=” av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” subheading_size=’15’ av-medium-font-size=” av-small-font-size=” av-mini-font-size=” icon_size=” av-medium-font-size-1=” av-small-font-size-1=” av-mini-font-size-1=” color=” custom_font=” icon_color=” margin=” margin_sync=’true’ padding=’10’ icon_padding=’10’ link=’manually,http://’ link_target=” id=” custom_class=” av_uid=’av-kg7pdxvj’ admin_preview_bg=”][/av_heading]

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Despite the prolonged lockdown and a reduction in auctions, Victorian property values have continued to defy gloomy price predictions with regional homes even setting a new quarterly record.

Releasing new data on Sunday, Real Estate Institute of Victoria President Leah Calnan said values were holding firm after six months of the Coronavirus pandemic.

“The quarterly median prices for the September Quarter 2020 released by the Real Estate Institute of Victoria have highlighted remarkable resilience in the Victorian property market,” Ms Calnan said.

“The highlight of the September Quarter is Regional Victoria. Regional Houses set a new quarterly record at $442,500 recording incredible growth at 5.1 per cent for the quarter and 4.9 per cent over the last 12 months.”

The REIV data indicates regional units fell slightly to $327,000, down 3.1 per cent from the past quarter but are 8 per cent more valuable than they were 12 months ago.

“The varying levels of restrictions placed on Melbourne Metro and Regional Victoria over the last couple of months impacted transaction volumes as expected,” Ms Calnan said.

“While transaction numbers in Melbourne plummeted by 31 per cent compared to the June Quarter, transactions in Regional Victoria soared by 15 per cent.

Market restrictions meant fewer properties were listed for sale, keeping prices relatively stable over the quarter.

House values in Metropolitan Melbourne remained strong, falling by just 1.7 per cent during the September Quarter to a median price of $846,000 while recording a 7.4 per cent annual growth.

Units in Melbourne achieved a median price of $622,500, which is 0.2 per cent higher than the June Quarter and an annual increase of 5.4 per cent.

Sales by private treaty increased in popularity with units in Melbourne Metro even recording 0.8 per cent growth to a new record surpassing $600k for the first time.

These results come amongst a backdrop of incredible and ongoing change in the Victorian property market.

“REIV market statistics are based on results directly sourced from agents and government records and provide a true picture of Victorian real estate.”
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[av_heading heading=’Homeowners plough cash into mortgages during lockdown’ tag=’h1′ style=” subheading_active=” show_icon=” icon=’ue800′ font=” size=” av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” subheading_size=’15’ av-medium-font-size=” av-small-font-size=” av-mini-font-size=” icon_size=” av-medium-font-size-1=” av-small-font-size-1=” av-mini-font-size-1=” color=” custom_font=” icon_color=” margin=” margin_sync=’true’ padding=’10’ icon_padding=’10’ link=’manually,http://’ link_target=” id=” custom_class=” av_uid=’av-kg7peruo’ admin_preview_bg=”][/av_heading]

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Voluntary payments into mortgages more than doubled in July, August and September from the previous 12 months, data from non-bank lender Firstmac shows, raising the question whether consumers will save, rather than spend, extra cash handed to them in last week’s budget.

Firstmac’s analysis of its $5.8 billion direct retail mortgage book shows the level of additional payments made by borrowers jumped to an average 10.2 per cent of the portfolio in the past three months, compared with the monthly average payment of 4.8 per cent last year.

“There’s obviously a lot of money flowing through the economy and people are choosing to save that money,” Firstmac chief financial officer James Austin told The Australian Financial Review.

“Paying down the mortgage is another form of saving.”

The surge in additional mortgage savings is consistent with other indicators, such as the June quarter national accounts showing the country’s household savings ratio jumped to 19.8 per cent, the highest level since 1974.

On one hand, the figures, which explain the relatively low level of arrears among mortgages seeking payment relief, provide a counterargument to concerns expressed by the Reserve Bank of Australia in last week’s Financial Stability Review that defaults could spike as these pandemic-relief measures come to an end.

But they also show a clear risk for the $17.8 billion in personal tax cuts Treasurer Josh Frydenberg announced last week to encourage people to spend and help lift the economy out of its first recession in 29 years: consumers could save, rather than spend, extra money they get.

Mr Austin said the increase in the extra payments by Firstmac’s customers, which at the end of September stood at 7.3 per cent of its total $12.2 billion portfolio, showed people were cautious.

“It would have to suggest borrowers were feeling uncertainty about what’s coming, so they’re paying down mortgages,” he said. “The obvious follow-on is they’re choosing not to spend it.”
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[av_heading heading=’2020–21 special budget edition’ tag=’h1′ style=” subheading_active=” show_icon=” icon=’ue800′ font=” size=” av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” subheading_size=’15’ av-medium-font-size=” av-small-font-size=” av-mini-font-size=” icon_size=” av-medium-font-size-1=” av-small-font-size-1=” av-mini-font-size-1=” color=” custom_font=” icon_color=” margin=” margin_sync=’true’ padding=’10’ icon_padding=’10’ link=’manually,http://’ link_target=” id=” custom_class=” av_uid=’av-kg7pm84e’ admin_preview_bg=”][/av_heading]

On Tuesday 6 October, the Treasurer, The Hon Josh Frydenberg MP, delivered the delayed 2020–21 Federal Budget, his second Budget.

How times change. In April last year, Mr Frydenberg delivered a Budget that was forecast to produce a surplus. Now, thanks largely to the economic shocks resulting from the COVID-19 pandemic, the Government is faced with record deficits and high unemployment.

The Government’s response is a Budget that is “all about jobs”, “helping those who are out of a job get into a job” and “helping those that are in work, stay in work”. Mr Frydenberg said “there is no economic recovery without a jobs recovery” and “no budget recovery without a jobs recovery”.

To that end, the government is spending a lot of money – both directly and indirectly (bringing forward the 2022–23 tax cuts and providing incentives for business to hire and invest). The Government’s overall “response and recovery support” is $507 billion, including $257 billion in direct economic support.

But it may not end there. As Treasury points out, there remains substantial uncertainty around the global and domestic outlook, including around the spread of the coronavirus, future outbreaks, as well as timing and efficacy of vaccines and other medical treatments. Only time will tell if the measures in this Budget are sufficient and/or well targeted.

Big picture overview

The big picture highlights of this year’s Budget:

Deficit: $213.7 billion (or 11% of GDP) in 2020–21, falling to $66.9 billion (3.0% of GDP) in 2023–24 and $49.5 billion (1.6% of GDP) by the end of the medium term
Net debt: $703 billion (or 36.1% of GDP) for 2020–21, rising to $966 billion (or 43.8% of GDP) by the end of the June 2024 quarter. Net debt is then projected to fall to 39.6% of GDP at the end of the medium term
Economic growth: The economy is forecast to fall by 3.75% this calendar year, but to grow by 4.25% in 2021
Unemployment: Unemployment is to peak at 8% in the December 2020 quarter and to fall to 6.5% by the June 2022 quarter
Total tax receipts: $424.6 billion ($364.7 billion excluding GST) for 2020–21 – revised down by $55.2 billion compared with the 2019–20 MYEFO but revised up by $8.7 billion since the July 2020 Economic and Fiscal Update (driven by stronger-than-expected labour market outcomes, higher commodity prices, and a shallower-than-expected deterioration in asset prices).

Other announcements

Health (COVID-19): Over $750 million to support the continuation of COVID-19 testing, $170.8 million for the continued operation of up to 150 dedicated respiratory clinics to manage and diagnose COVID-19 cases; $1.1 billion to States and Territories through a funding agreement on COVID-19 Response (in addition to the $3.7 billion already provided); $111.6 million to support the continuation of temporary MBS telehealth services for GP consultations, mental health, allied health and specialist services
COVID-19 vaccine: $1.7 billion over two years from 2020–21 to secure access to over 84.8 million doses of potential vaccine candidates developed by the University of Oxford and the University of Queensland; $123.2 million to join the international COVAX facility; $24.7 million to purchase vaccine needles, syringes and sharps disposal containers
Mental health: $100.8 million over two years from 2020–21 to ensure people with a mental health care plan can access up to 10 additional Medicare-subsidised individual psychological therapy sessions
Aged care: $245 million to support aged care providers to meet additional costs associated with COVID-19; $205.1 million for the Workforce Retention Bonus Payments for aged care workers; $103.4 million to extend the Aged Care COVID-19 preparedness measure
Child care: A Victorian recovery payment equivalent to 25% of pre-COVID revenue through to 31 January 2021 – conditional on maintaining a fee freeze at pre-COVID-19 levels and child care services maintaining the Employee Guarantee protections for relevant employees
Health insurance: Increasing the maximum age of dependents allowed under private health insurance policies from 24 to 31 years and removing the age limit for dependents with a disability
Housing: Extending the First Home Loan Deposit Scheme by a further 10,000 places; enabling the National Housing Finance and Investment Corporation to issue an additional $1 billion worth of bonds to attract investment to increase the supply of affordable housing
Higher education: $1 billion in new research funding to the university sector in 2020–21; $251.8 million over two years to support the delivery of 50,000 online short courses online in areas such as teaching, health, science, information technology and agriculture; $298.5 million over four years to provide an additional 12,000 undergraduate Commonwealth Supported Places in 2021 prioritised according to labour market need, skills gaps, industry engagement and expected student demand
Jobseekers: $295.9 million to deliver a new Digital Employment Services platform that will assist job seekers in managing their own way into employment and training; $183.1 million to provide responsive and individualised support to online job seekers, including through a Digital Services Contact Centre; $62.8 million to establish a new Local Jobs Program to connect job seekers to local employment opportunities
Infrastructure (general): $14 billion over the forward estimates period for new and accelerated projects since the onset of the COVID-19 pandemic; a new $2 billion Road Safety Program; an additional $1 billion of funding for the Local Roads and Community Infrastructure Program
Infrastructure (specific projects): $603 million for the New England Highway Singleton Bypass and Bolivia Hill Upgrade (NSW); an additional $491 million for the Coffs Harbour Bypass (NSW); $528 million for upgrades to the Shepparton and Warrnambool rail lines (Vic); $750 million for Stage 1 of the Coomera Connector (Qld); $227 million for METRONET – High Capacity Signalling and Morley Ellenbrook Line and $87.5 million for Reid Highway Interchanges – West Swan Road (WA); $200 million for the Hahndorf Township Improvements and Access Upgrade and $136 million to progress the Main South Road Duplication Stage 2 (SA); $65 million for the Tasman Bridge Upgrade (Tas)
Manufacturing: $1.3 billion for the Modern Manufacturing Initiative; $107.2 million for the Supply Chain Resilience Initiative
Regional Australia: $550 million for a package of measures to support regional Australia recover from the impacts of COVID-19, including $250 million for a Regional Tourism Recovery Package
Online: accelerated adoption of digital technologies to increase productivity and jobs growth and bring Australia closer to its goal of being a leading digital economy by 2030
Agriculture: $328.4 million over four years to bust congestion in the regulation of farm exports, making it easier for farmers to get their goods to market and helping rural Australia to recover from drought and COVID-19
Trade: $28.6 million to support initiatives to modernise Australia’s trade system and streamline border services
Fighting crime: $15.1 million to the ATO to target serious and organised crime in the tax and superannuation systems.

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[av_heading heading=’Further technical detail needed on new super measure’ tag=’h1′ style=” subheading_active=” show_icon=” icon=’ue800′ font=” size=” av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” subheading_size=’15’ av-medium-font-size=” av-small-font-size=” av-mini-font-size=” icon_size=” av-medium-font-size-1=” av-small-font-size-1=” av-mini-font-size-1=” color=” custom_font=” icon_color=” margin=” margin_sync=’true’ padding=’10’ icon_padding=’10’ link=’manually,http://’ link_target=” id=” custom_class=” av_uid=’av-kg7pnzjf’ admin_preview_bg=”][/av_heading]

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As part of its Your Future, Your Super package, the government revealed plans in the federal budget on Tuesday to staple existing superannuation accounts to a member in order to avoid the creation of a new account when the person changes their employment.

Heffron head of SMSF technical and education services Lyn Formica explained that under the current system where an employee doesn’t make a choice about which fund they’d like their superannuation guarantee contributions to go to, contributions are made to the employer’s default fund.

“This inevitably means that many individuals end up with multiple superannuation accounts when they change jobs, simply because they fail to nominate their existing fund as their chosen fund,” she said.

From 1 July 2021, the government has proposed that an individual’s super fund will be stapled to them, which means that if an employee does not nominate a fund at the time they start a new job, their new employer must pay their super contributions to their existing fund rather than the employer’s default fund, she said.

Details of an employee’s existing fund will be available to their employer via the ATO.

Speaking in a Heffron webinar, Ms Formica said it is still unclear, however, how these rules would work if the employee already has multiple super accounts at the time they change jobs.

For example, the process for deciding which fund of these multiple funds the contributions will be paid to is still uncertain, she said.

The fund that the employer decides to pay the contributions to may not be the fund holding life insurance.

“One of those [multiple] funds may not recognise me for life insurance for my occupation,” she noted.

“There is a lot of detail that the government still needs to work through as they consult on getting these measures ready, but essentially, it would seem to be a good idea in terms of improving people’s superannuation options.”
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Sources: The Australian Financial Review, Accountants Daily, Elite Agent, SMSF Advisor and CFH Partners

Disclaimer: This is general information only and is subject to change at any time. Your complete financial situation will need to be assessed before acceptance of any proposal or product. The Content provided herein has been prepared for informational purposes only. The Content does not constitute tax, legal or accounting advice and should not be relied upon as such. You should seek tax, legal or accounting advice before acting or relying on any Content.

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