The Federal Treasurer, Josh Frydenberg, brought down the annual Federal Budget on Tuesday 11 May with plenty of winners across multiple sectors. As expected, anticipated and leaked before the official speech, this is a very big-spending budget with a focus on jobs and recovery in light of the effects of the coronavirus pandemic on the economy. Several key sectors feature heavily in the spending including aged care following the findings of the Royal Commission, support for women in various measures and a continuation of the major spending on infrastructure.
After the huge stimulus packages introduced just over a year ago followed by the October budget announcement of the delayed 2020/21 Budget which further extended some measures, what were you expecting in the 2021/22 Budget? We briefly outline the key elements that have an impact specifically on our area – motor vehicle lending and business investment and will go into further detail in future articles.
The economic figures have defied the worst-case scenario with unemployment currently at 5.8% and expected to fall below closer to 5% and below into and through 2022. Economic growth is on a good tracking. One of the keys to some sectors is international border openings and this is not expected until 2022. Not good news for those in travel and tourism but targeted measures for these industries have been included in the budget.
As expected the deficit is, as all and sundry have described, eye-watering, but has been revised down by over $50 billion from previous estimates. What this will mean for future budgets, we’ll just have to wait and see.
Winners in Business
As major lenders to the motor vehicle sector, Jade Car Loans are pleased to see temporary full expensing and Instant Asset write-offs for eligible assets and businesses extended through to 2022/23. This allows eligible businesses to fully deduct the cost of eligible assets in the year of purchase.
This was already in place for the 2021/22 financial year and the further extension may enable businesses to schedule additional investments over several years. It may mean the purchase of several business vehicles over several years to upgrade an entire fleet can now be planned.
Another key business measure to be extended into 2022/23 is Loss Carry Back. We have covered this in detail in previous articles and will provide additional refresher updates in coming articles. But in brief, if your business makes a loss in the eligible years but a profit in earlier eligible years, you can claim the loss against previous profits rather than carrying it forward to claim against hopefully future profits. More information.
If a loss is carried back, a business can be refunded the relevant amount of tax that was paid earlier. Effectively getting a cash injection when the tax return is submitted.
Infrastructure spending is massive and for those in construction and related sectors, the earmarked projects may mean business opportunities ahead. Opportunities that require investment in new vehicles. We’ll detail these in another article. Read more on infrastructure plans for the 2021/2022 budget.
Small businesses are also in line for assistance in specific areas.
Individual Tax-Payer Measures
The big win for individual taxpayers is the extension of the Low and Middle Income Tax Offset (LMITO) for another year. This was flagged pre-budget so a bit of an anti-climax on budget night. The amount you may receive is dependent on your income with those earning between $48K and $90K per year standing to receive the maximum $1080.
This is an offset, so it is accounted for when you submit your tax return. A good reason to not delay getting your tax return finalised and submitted. For those in the relevant tax brackets, it can mean a handy cash tax return is coming your way. Possibly facilitating the purchase of a new car by having that little extra as a buffer for your budget, to put down as a deposit to reduce your car loan or to make additional payments on a Secured Car Loan.
As mentioned above, international borders are expected to be closed till well into 2022 so that means many more Australians will need to keep planning to holiday at home. A great reason to plan some interesting road trips in a new car.
Interest Rates Implications
Changes to interest rates on lending, including rates for a low doc business car loan, are not announced in the Federal Budget as the Government is not responsible for setting interest rates. That is the responsibility of the RBA (Reserve Bank of Australia). However, the policies introduced by the Government in the Budget do impact the economic indicators that the RBA looks to when making their decisions on interest rates.
Keys are the inflation and unemployment figures. The RBA has previously and continually stated it would be looking for unemployment to possibly sub 5% and inflation in the 2-3% range before increasing the official cash rate.
Based on the forecasts by the Treasurer in the 2021/22 Budget, it could be expected that the RBA’s forecasts of keeping interest rates at the current low levels through 2022 are on target.
So no change to interest rates on our Jade Car Loans due to the budget announcements, even for those considering new business vehicle finance. This is just a brief overview and is mindful that the Budget is a Bill that has to be passed by the Australian Parliament before it is officially in law.
We’ll bring you a more detailed analysis of key measures in future postings and we’re ready to take your call if you would like to proceed now with that new car purchase.
Contact 1300 000 003 to discuss your requirements with one of our consultants.
DISCLAIMER: IN REGARD TO MISREPRESENTATIONS AND ERRORS CONTAINED IN THE MATERIAL AS PRESENTED, LIABILITY IS NOT ACCEPTED. THE DETAILS AND CONTENT IS PROVIDED FOR CAR BUYERS AND INDIVIDUALS AND BUSINESS SEEKING FINANCE PURELY AS GENERAL INFORMATION. THIS IS NOT PROVIDED AS THE ONLY SOURCE OF FINANCIAL INFORMATION. ANYONE THAT CONSIDERS THAT NEED FINANCIAL ADVICE ABOUT THEIR SPECIFIC REQUIREMENTS SHOULD SEEK THEIR OWN FINANCIAL ADVISOR.