The Federal Budget for 2021-22 was unveiled to recover Australian economy from the COVID-19 pandemic and roar back the economic growth for all Australians.
In 2021-22, the economy is expected to grow by 4.25%, unemployment is to fall from 5.6% to 5%, inflation is expected to be 1.75%, wage is to grow by 1.5%, budget deficit to reach a historic high of $106 billion and the national debt is set to peak almost $1 trillion by 2025.
The entire budget is based on highly optimistic assumptions: the international borders will reopen by 30 June 2022 and the Australians will be fully vaccinated by the end of 2021, both of which may not likely to be achieved.
The main features of the budget are highlighted below.
The centrepiece of the budget is the $17.7 billion allocation for aged care over the next 3 years. This outlay was in response to the Aged Care Royal Commission. It includes an additional 80,000 home care packages and a care plan of 3 hours 20 minutes for each aged care residents per day.
Over the next 5 years, the budget allocates an extra $1.9 billion for vaccination and $1.5 billion for COVID-related health services such as testing and contact tracing. The budget also includes an undisclosed amount, from an unallocated amount of $3.8 billion, to invest in mRNA vaccine manufacturing in Australia.
The “Low and Middle Income Tax Offset” provided in the last federal budget has been extended for another 12 months, to 30 June 2022. This tax offset is received by taxpayers after lodging respective tax returns for the year. The amount of offset differs amongst income groups, for example, a taxpayer in the income bracket $90,001 to $126,000 would receive approximately $1,080.
To encourage more women into workforce and enhance their superannuation balances, the budget outplayed $1.8 billion for child care over the next 5 years. The Government will pay 65% of the child care cost if you have one kid and 95% if you have two or more kids in the childcare. The current cap of $10,560 for households with an annual income of more than $189,390 will be abolished and hence, all Australians will be entitled to childcare benefits.
The budget provides a huge $3.4 billion package, including the childcare, for women over the next 5 years: $260 million for family violence support services, another $164 million for financial support to women fleeing family violence (each payment up to $5,000 in cash and goods), $42.4 million towards scholarships for women in science, technology, engineering and mathematics as well as $21.6 million for sexual and reproductive health services.
Business Tax Incentives
The current business asset tax write-off provisions are extended for another 12 months, to 30 June 2022. Australian businesses with annual turnover of up $5 billion will be able to claim a full tax deduction for any eligible asset like work vehicle or equipment under this initiative. In addition, they will be allowed to carry back losses incurred up to 30 June 2023 to offset against business profits made going back to 30 June 2019. There is an allocation of $500 million for Apprentice Support Scheme and JobMaker Hiring Credit Scheme.
The budget allocates $2.3 billion for National Mental Health and Suicide Prevention Plan over the next 4 years. From this, $1.4 billion will be spent for a new national network of mental health treatment centres for adults, youth and kids; $298 million for suicide prevention; $250 million for online mental health counselling; $202 million to increase workforce in the mental health sector and $107 million for vulnerable Australians including indigenous people.
From 1 July 2022, the rate of superannuation guarantee contribution by employers to employees will increase from 9.5% to 10%; all eligible employees will receive superannuation guarantee contributions from their employers as the minimum income threshold of $450 in a calendar month will be removed; Australians aged 67 to 74 will be able to make non-concessional or salary sacrificed superannuation contribution without meeting the work test of at least 40 hours of work over 30 consecutive days in the financial year; the age of home down sizers is reduced from 65 to 60 to make one-off superannuation contributions of $300,000 to their superannuation funds from the proceeds of selling their homes and retirees from certain legacy retirement products have the opportunity to transition to newer, more flexible products and start new products with their capital in the legacy products.
From 1 July 2022, the first home buyers are able to withdraw $50,000, an increase from the current limit of $30,000, from their First Home Super Saver Account; an additional 10,000 places are provided for first home buyers to purchase a newly constructed home or build a new home, they are eligible to borrow more than 80% of property value with only 5% deposit and pay no lender’s mortgage insurance as well as up to 10,000 eligible single parents with dependents have the opportunity to enter or re-enter the housing market with a deposit of just 2%.
Losers in the Budget
There is no specific funding for Australian universities in this budget for 2021-22. As the international borders may only reopen mid-next year, international students can’t return to profit the universities. For the international students who are here, the budget measures scrap the fortnightly limit of 40-hours of work.
International tourism sector has no support in the budget. No new funding for renewables in the budget except a mere $30 million for a big battery and microgrid project in Northern Territory.
Skilled migration will fall by 97,000 by 30 June 2021 and further 77,000 by 30 June 2022. The budget predicts an increase of 235,000 by 30 June 2024 which is highly dependent on the COVID-19 situation around the world. Only cuts in this budget is to newly arrived migrants, entering Australia from 1 January 2022. They will have to wait 4 years for most of the welfare payments, saving the budget an estimated $671 million over 5 years from people who deserve every assistance to settle in a new country.