What the 2020 Federal Budget means for you

2020 Federal budget overview

As widely anticipated, the announcement included bringing forward personal income tax cuts already legislated. Together, these changes deliver tax relief to low- and middle-income earners for the 2020-21 income year of up to $2,745 for individuals and up to $5,490 for dual income families.

This summary provides coverage of the key issues of most interest to you. We have expanded the key points below on the following pages.


Tax Changes:

  • Immediate personal tax relief for individuals – income tax cuts scheduled
  • Exempting granny flat arrangements from capital gains tax


  • Employers will no longer create default superannuation accounts for most new employees.
  • From July 2021, the performance of MySuper products will be benchmarked annually, with underperforming funds being required to notify members.
  • New tools available to help fund members compare options.

Social Security

  • Covid-19 response package – further economic support payments

Business Owners

  • Extension of the provision allowing small business to instantly write-off asset purchases
  • Temporary loss carry-back to support cash flow
  • Covid-19 response package – Victorian Government grants
  • JobMaker hiring credit

Personal income tax - In detail

The Government will bring forward the second stage of its Personal Income Tax Plan by two years to 1 July 2020 while retaining the low and middle income tax offset (LAMITO) for 2020-21. The changes will provide immediate tax relief to individuals and support the economic recovery and jobs by boosting consumption.

Bringing forward the second stage of the Personal Income Tax Plan

The following changes have been announced:

  • The top threshold of the 19 per cent 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 The increased LITO will be withdrawn at a rate of 5 cents per dollar between taxable incomes of $37,500 and $45,000. The LITO will then be withdrawn at a rate of 1.5 cents per dollar between taxable incomes of $45,000 and $66,667.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 per cent personal income tax bracket will increase from $90,000 to $120,000.

 Taxable income

Stage 2: Tax payable1 (residents)

Up to $18,200 Nil
$18,201 - $45,000 Nil + 19%
$45,001 - $120,000 $5,092 + 32.5%
120,001 - $180,000 $29,467 + 37%
Above $180,000 $51,667 + 45%

 1Plus Medicare levy.

Example of tax savings

Taxable income 2017-18 tax liability Annual tax savings since 2018*  Total tax saved with second round of tax cuts* Total Savings
$20,000 $0 $0 $0 $0
$21,000 $87 $87 $87 $174
$22,000 $279 $255 $255 $510
$23,000 $569 $255 $255 $510
$24,000 $859 $255 $255 $510
$25,000 $1,149 $255 $255 $510
$30,000 $2,397 $255 $255 $510
$40,000 $4,947 $480 $580 $1,060
$50,000 $8,547 $1,080 $1,080 $2,160
$60,000 $12,147 $1,080 $1,080 $2,160
$70,000 $15,697 $1,080 $1,080 $2,160
$80,000 $19,147 $1,080 $1,080 $2,160
$90,000 $22,732 $1,215 $1,215 $2,430
$100,000 $26,632 $915 $1,665 $2,580
$120,000 $34,432 $315 $2,565 $2,880
$140,000 $42,232 $135 $2,565 $2,700
$160,000 $50,032 $135 $2,565 $2,700
$180,000 $57,832 $135 $2,565 $2,700
$200,000 $67,232 $135 $2,565 $2,700

What does this mean?

For an individual earning $90,000 p.a. they will save an additional $1,215 in tax in addition to the previous savings, bringing total savings to $2,430.
More money in the hands of taxpayers should help boost spending, although household savings rates increased during Covid and it remains to be seen if more will need to be done to encourage spending and return confidence.

Supporting Older Australians — exempting granny flat arrangements from capital gains tax

The Government will provide a targeted capital gains tax (CGT) exemption for granny flat arrangements where there is a formal written agreement. The exemption will apply to arrangements with older Australians or those with a disability. The measure will have effect from the first income year after the date of Royal Assent of the enabling legislation.

CGT consequences are currently an impediment to the creation of formal and legally enforceable granny flat arrangements. When faced with a potentially significant CGT liability, families often opt for informal arrangements, which can lead to financial abuse and exploitation in the event that the family relationship breaks down. This measure will remove the CGT impediments, reducing the risk of abuse to vulnerable Australians.


Superannuation reform

The Government will provide $159.6 million over four years from 2020-21 to implement reforms to superannuation to improve outcomes for superannuation fund members. The reforms, which will reduce the number of duplicate accounts held by employees as a result of changes in employment and prevent new members joining underperforming funds, include:

  • the Australian Taxation Office will develop systems so that new employees will be able to select a superannuation product from a table of MySuper products through the YourSuper portal
  • an existing superannuation account will be ‘stapled’ to a member to avoid the creation of a new account when that person changes their employment. Future enhancements will enable payroll software developers to build systems to simplify the process of selecting a superannuation product for both employees and employers through automated provision of information to employers
  • Superannuation trustees will be required to comply with a new duty to act in the best financial interests of members, this has been in place for financial advisers for many years and will drastically change intra-fund advice and benefit many clients with industry superannuation accounts and those without a financial adviser.
  • from July 2021 the Australian Prudential Regulation Authority will conduct benchmarking tests on the net investment performance of MySuper products, with products that have underperformed over two consecutive annual tests prohibited from receiving new members until a further annual test that shows they are no longer underperforming.

How does this benefit me?

How your super fund performs can make a big difference to the amount of money you have when you retire. This change means that your super fund will need to tell you if your fund has underperformed compared to other super funds. You can then make a decision about whether you want to stay with your fund or change to another fund.

4 million Australians currently have multiple super accounts, and this means they’re paying more than one set of super fees and possibly multiple insurance premiums as well. The Government estimates that this is costing Australians $450 million each year. The intention of this change is to keep people’s super accounts attached to them, so they can take them from job to job. By having only one super account, you can stop paying unnecessary fees and insurance premiums that may be eroding your super balance. Having all your super together can also help your super savings accumulate faster.

Social security – in detail

COVID-19 Response Package — further economic support payments

The Government will provide $2.6 billion over three years from 2020-21 to provide two separate $250 economic support payments, to be made from November 2020 and early 2021 to eligible recipients and health care card holders. These payments are exempt from taxation and will not count as income support for the purposes of any income support payment.

  • Two separate $250 economic support payments will be provided to eligible recipients. The first payment will be made from November 2020 and the second from early 2021. A one-off $1,500 pandemic leave payment will be made to eligible individuals who are unable to work and earn income while under a direction to self-isolate, quarantine or who are caring for someone who has tested positive to COVID-19.
  • The independence test for Youth Allowance and ABSTUDY will be temporarily revised from 1 January 2021. Young people who are seeking to qualify as independent for the purposes of assessing Youth Allowance (student) and ABSTUDY payment eligibility will also be provided with incentives to participate in seasonal work in the agricultural industry. Veterans’ disability pensions will be exempt from the income test for Commonwealth Rent Assistance (CRA) and income support payments.

How does this benefit me?

You may be eligible for the two payments of $250 if you’re currently receiving:

  • Age Pension (including Age Pension (Blind))
  • Carer Allowance*
  • Carer Payment
  • Commonwealth Seniors Health Card
  • Disability Support Pension (including Disability Support Pension (Blind))
  • Double Orphan Pension*
  • DVA Gold card
  • DVA Payments
  • DVA Seniors Card
  • Family Tax Benefit (fortnightly recipients)*
  • Family Tax Benefit (lump sum recipients)*
  • Pensioner Concession Card (PCC) holders (covers non income and asset test PCC holders and people who have an extended entitlement to a PCC even though their payment has stopped).

Business owners – in detail

Temporary full expensing to support investment and jobs

The Government will support businesses with aggregated annual turnover of less than $5 billion by enabling them to deduct the full cost of eligible capital assets acquired from 7:30pm AEDT on 6 October 2020 (Budget night) and first used or installed by 30 June 2022. It will improve cash flow for qualifying businesses that purchase eligible assets and bring forward new investment to support the economic recovery.

Full expensing in the year of first use will apply to new depreciable assets and the cost of improvements to existing eligible assets. For small and medium sized businesses (with aggregated annual turnover of less than $50 million), full expensing also applies to second-hand assets.

Temporary loss carry-back to support cash flow

The Government will allow eligible companies to carry back tax losses from the 2019-20, 2020-21 or 2021-22 income years to offset previously taxed profits in 2018-19 or later income years.

Corporate tax entities with an aggregated turnover of less than $5 billion can apply tax losses against taxed profits in a previous year, generating a refundable tax offset in the year in which the loss is made. The tax refund would be limited by requiring that the amount carried back is not more than the earlier taxed profits and that the carry back does not generate a franking account deficit. The tax refund will be available on election by eligible businesses when they lodge their 2020-21 and 2021-22 tax returns.

Currently, companies are required to carry losses forward to offset profits in future years. Companies that do not elect to carry back losses under this measure can still carry losses forward as normal.

COVID-19 Response Package — making Victoria’s business support grants non-assessable, non-exempt income for tax purposes

The Government will make the Victorian Government’s business support grants for small and medium business as announced on 13 September 2020 non-assessable, non-exempt (NANE) income for tax purposes.

State-based grants such as the Business Support Grants are generally considered taxable income by the Commonwealth. Given COVID-19 and the exceptional circumstances Victorian businesses face, providing this additional concessional treatment will assist in their recovery.

The Commonwealth will extend this arrangement to all States and Territories on an application basis. Eligibility would be restricted to future grants program announcements for small and medium businesses facing similar circumstances to Victorian businesses.

The Government will introduce a new power in the income tax laws to make regulations to ensure that specified state and territory COVID-19 business support grant payments are NANE income.

Eligibility for this treatment will be limited to grants announced on or after 13 September 2020 and for payments made between 13 September 2020 and 30 June 2021.

JobMaker Hiring Credit

The Government will provide $4.0 billion over three years from 2020-21 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.

Eligible employers who can demonstrate that the new employee will increase overall employee headcount and payroll will receive $200 per week if they hire an eligible employee aged 16 to 29 years or $100 per week if they hire an eligible employee aged 30 to 35 years. The JobMaker Hiring Credit will be available for up to 12 months from the date of employment of the eligible employee 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.

What is General Advice

General advice is a type of financial advice in which advisers can provide advice to clients without having taken into account their personal objectives or needs. General advice may be presented either verbally or in written form and can include electronic communication. When giving general advice it is required that a financial adviser give a warning that the advice has not considered personal circumstances and hence the client should therefore consider the appropriateness of the advice before they act on it.

General advice is extremely beneficial for those who are without a financial adviser as it is more affordable, and the advice is given much quicker as oppose to personal financial advice.

Examples of General Advice

General advice may include advice regarding an individual’s;

  • Existing superannuation fund/s
  • Accessing Superannuation under the Covid stimulus measures.
  • Ownership Structure of existing Insurance Policies to improve cash flow.
  • Understanding the Pension factor reduction measures.
  • General advice and information including;
    • Understanding how recent volatility has affected their portfolio.
    • Understanding how existing Superannuation is currently invested and the fees being charged.

Benefits of General Advice

  • Not all clients may need comprehensive advice which is costly and can take time to deliver.
  • It can help people resolve specific questions.
  • It can lead to client’s maximising the options within their current products and;
  • Leads to making educated decisions
  • It is accessible and quick to deliver however has some limitations by nature whereby personal advice may be more appropriate.

What if the adviser holds personal information about a client?

  • If an adviser does contain personal information about a client, general advice can still be given.
  • The adviser must however ensure that they do not consider the client’s relevant circumstances when preparing and giving the general advice

General Advice Versus Personal Advice

General Advice Advantages Personal Advice Advantages
Quicker and more affordable – only pay for time you meet with an adviser. Considers the client’s financial situation, objectives and needs.
It is accessible and quick to deliver however has some limitations by nature whereby personal advice may be more appropriate.


Will result in the client’s best interest duty being met and will benefit the client by placing them in a better position as a result of the advice.
Leads to making educated decisions about a limited set of circumstances.


Takes into account implicit and explicit factors.
It can lead to client’s maximising the options and features within their current products and policies.


Relies upon the skill and diligence of the financial adviser.
Can help people resolve specific questions.


Can help clients to identify and achieve goals and set a plan to follow and may result in a higher change of long term success in achieving objectives.


General Advice Disadvantages Personal Advice Disadvantages
Does not consider the clients financial situation, objectives and needs. Less affordable
Has limited benefits compared with personal advice, for example the client’s current product might not be the most suitable or best product available based upon their individual circumstances however this cannot be addressed. Can time consuming to produce. Some disclosure documents (Statements of Advice) can exceed 100 pages and be more than 20,000 words.
The limitations placed on the adviser when giving general advice means that the advice may not be appropriate hence a warning is given at the time the advice is provided. Personal advice may not benefit the client if the cost versus benefit of providing the advice exceed the financial saving or benefit to the client.


Group Cover Versus Retail Cover

Group Insurance is a pooled insurance product offered by a Superfund or employer to a group of people. The agreement is between one owner (the trustee of a Superfund or an employer) and the insurer. Often, people will hold a default level of group cover via their industry superannuation fund.

 Retail Insurance is an individual insurance product offered by an insurer to the life insured and policies are channelled via intermediaries such as financial advisers or comparison websites. The application process involves underwriting – an assessment of risk of the life to be insured, which involves a medical component (personal / family history, potential collection of bloods etc) and/or financial component (proof of income etc).


Group Insurance Cover Advantages Retail Insurance Cover Advantages
·         Reasonably cheap premiums when compared with Retail cover.

·         Persons who may not be able to obtain individual cover, or have an exclusion or loading applied, are able to access a level of cover.

·         The application process generally very simple and straightforward.

·         Underwriting not normally required (up to automatic acceptance levels).


·         Policy terms are ‘locked’ (not subject to change) at time policy goes ‘In Force’.

·         Comprehensive (more ‘generous’) policy terms.

·         You are generally able to insure larger sums (maximums – life – unlimited / TPD – $5m / Trauma – $2m)

·         Cover levels (benefits) are fixed (or can increased with CPI / other indexation)

·         Flexible premium structures (Stepped / Level) – to cater for short & long-term insurance needs.

·         Flexible policy options (e.g. Income Protection contracts – more options available for waiting / benefit periods, Agreed / Indemnity cover etc)

·         Able to appoint a servicing adviser.

·         You can elect to structure premiums inside and outside of superannuation (called super-linking) to maximise feature, benefits and tax deductibility of premiums.


Group Insurance Cover Disadvantages Retail Insurance Cover Disadvantages
·         Variability of policy terms & conditions – T&Cs can be changed at any time upon agreement between the trustee / employer and the insurer and can apply to existing policy holders, not just new policy holders

·         Strength of policy is usually weaker as cover definitions are less comprehensive than retail cover policies.

·         Generally lower maximum sums insured.

·         Normally cover is unitised meaning cover will decrease as the life insured ages.

·         Typically, only ‘Stepped’ type premium structure available (i.e. cheaper during initial years but increases substantially over time)

·         Less flexibility with policy options (e.g. Income Protection contracts – restrictive waiting / benefit periods)

·         Unable to appoint a servicing adviser (a servicing adviser can assist & support with the application process, policy queries, claims management).

·         As with retail cover funded from superannuation, you will need to meet the superannuation trustee's condition of release to access benefits in addition to the policy terms.


·         Generally, retail policies are more expensive than group policies (but reflective of a better-quality product)

·         A more detailed application process (can take 4-6 week to finalise)

·         Underwriting (medical / financial) potentially required.

·         Based upon underwriting outcomes, you may be offered alternative terms, loadings or exclusions depending on your health history or may be decline cover.

·         As the sums insured does not decline with age, stepped premiums can increase significantly with age, affecting the long-term affordability of retail cover premiums.