Federal Budget 2020 Discussion, and will you spend your tax cut?

scotty on 06/10/2020 - 09:10

It's Federal Budget night tonight, and as per what we have done in previous years (2019, 2018, 2017, etc), here's the catch-all thread for any Federal Budget related discussions for this year.

I'll link to ABC when summary article becomes available. Meanwhile, here's the prediction from SMH

  • Lots of infrastructure spending & manufacturing aids
  • Supplements to salaries of apprentices & trainees
  • Income tax cut brought forward to this year

I think most relevant to majority of OzBargainers here would be the tax cut.

The tax plan means people who earn between $45,000 and $90,000 will take home an additional $1,080 this financial year.

Workers who earn more than $90,000 will take home up to $2,565 extra, with people earning more than $120,000 receiving the maximum benefit.

Government would be hoping that with more disposable income, people will be spending more to add a bit of boost to the economy. However the question for the ozbargainers is — will you spend your up to $2.5k tax cut this year? If so, how would you spend it?

Poll Options expired

  • 19
    Yes, I will spend even more to help the economy to grow!
  • 35
    Yes, I will spend every cent of my tax cut
  • 164
    Maybe I will spend some and save some
  • 560
    No, they will go straight to my saving / offset account
  • 23
    No, I'll save more for Bikie-hire, in preparation for the upcoming anarchy
Financial Federal Budget

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Comments

  • mskeggs on 06/10/2020 - 09:17
    +85

    There are a lot of people out of work for whom a tax cut doesn’t offer much help.

    • Bren20 on 07/10/2020 - 12:10
      +42

      The logic is that a tax cut leads to more consumer spending (as people have more money) which saves jobs.

      The problem is, as the poll shows no one wants to spend money as we are in a recession with poor job security, so the money won't flow. I much prefer the approach of maintaining taxes where they are, and hitting the stimulus projects even harder to keep people in jobs. People/Government use a crisis to justify what they already wanted to, not to critically re-evaluate and change position. The government agrees with tax cuts, so we got tax cuts.

      We probably need to broaden the stimulus away from male dominated jobs (construction), this should have been a perfect opportunity to plow a lot of money into aged care, but this would go against the government's privatisation agenda. The budget response to aged facilities is to provide increased support for 'at home care', ignoring the structural problems with the private residential care system.

      • Franky23 on 07/10/2020 - 15:58
        +16

        The poll is definitely showing one of the flaws in these tax cuts. Increasing the pension by $50 a week and much greater tax cuts for people on low income would put a lot more money into the economy than providing huge tax cuts for people on high incomes. It would also put much less stress on healthcare services, especially mental health care services.

        • cloudy on 07/10/2020 - 21:13
          +10

          I think the problem with most commentators suggesting money into the low incomes (pensioners, etc) is that most of their spending continues to hit the areas that needs it least. What i want to see is more money spent in a more spread out fashion, not continue to boost up areas where demand is already strong and people/business incomes are already high.

          Supermarkets, bigw/kmarts, chemists, etc haven't felt a thing from covid, in fact, most have benefited from it. I'd like to see money hit the entertainment, restaurants, tourism, pubs etc. Most people who go to concerts, or travel or have nice expensive meals are not your pensioners or poor students etc.

          I feel like these tax cuts, along with pressure for states to ease restrictions is designed to help that area the most, which I can only see as a good thing.

          • funnysht on 08/10/2020 - 10:33
            +1

            @cloudy: Most pensioners i would imagine are conservative and would vote liberal. It i the middle age group they want to attract to their side that may swing the vote. The liberals have already given up on the young generation. They'll get their vote when hell freezes over aka. when global warming is proven incorrect….

          • uder on 09/10/2020 - 11:44
            +1

            @cloudy: There's a multiplier effect that happens when low income earners (jobseekers) spend any marginal increase in income. It flows throughout those sectors. If money is saved it does not multiply at all.

            • cloudy on 09/10/2020 - 21:09
              +1

              @uder:

              There's a multiplier effect that happens when low income earners (jobseekers) spend any marginal increase in income. It flows throughout those sectors. If money is saved it does not multiply at all.

              Partially true. Money saved, or in most cases, reduced (mortgage debt), not only puts X in pocket of those who get it, but it puts X times interest rate compounded over time. This effect is often what is described as "does not multiply at all", is how wealthy people build wealth, how wealthy families build wealth, how wealthy nations build wealth.

              I know it sounds stupid, but sometimes this "nothing at all" business, isn't so bad.

      • gromit on 07/10/2020 - 16:32
        +2

        The problem with stimulus projects it is only a step better than handing out cash directly, I guess at least it keeps the money in the country where cash tends to help a lot of overseas shopping sites. Project Stimulus It is not sustainable and eventually it has to be wound back and what you are then left with is a whole heap of people that still need employment, so at best it is a temporary measure. Far better to aim the stimulus at business with tax incentives, though this is always unpopular with voters as it is not an instant in pocket win for them.

      • netjock on 08/10/2020 - 10:15
        +9

        Fat chance. Knowing this country the national sport is house buying, will go straight against negative gearing. Other than build phase houses provide jack all jobs.

      • funnysht on 08/10/2020 - 10:30
        +1

        common sense thinking like yours does not win elections.

        • [Deactivated] on 10/10/2020 - 11:55

          Every man for themselves

          government spend the tax -> corruption

          government give tax payers to spend -> goes straight to savings account

          the flaw of a democratic system

          but communist is no better

      • myusername on 09/10/2020 - 13:39
        +3

        same logic as trickle down economy

        and people laugh at kids for believing in santa

      • SelfMade on 09/10/2020 - 14:38
        +3

        This poll is on the OzBargain forum, it's highly skewed…most people are not as tight with their money.

        • John Dough on 10/10/2020 - 09:27
          +1

          Yes anyone can make statistics look how they want them to.
          Post this same poll in an investment forum and see how the results look!

    • netjock on 08/10/2020 - 10:14
      +6

      You know the liberals. Tax cuts are great for those who have a job. If you don't you're stuffed.

  • iforgotmysocks on 06/10/2020 - 09:19
    +32

    I will pre-order more Xbox series X's.

    • bemybubble on 06/10/2020 - 10:04
      +8

      Funnily enough this is exactly the type of spending the treasurer wants from the people.

      • iforgotmysocks on 06/10/2020 - 15:03
        +10

        Plus there have been so many good RRP deals.

        • Pro-crastinator on 07/10/2020 - 00:33
          +1

          Yeah, but he forgot to finish with "and then profiteer on Gumtree when none are available… then put the extra money into my savings/offset" :)

          • luffyex2010 on 07/10/2020 - 10:21
            +3

            @Pro-crastinator: Gumtree have banned all pre-order ps5 and Xbox series x listing I believe.

            • serpserpserp on 07/10/2020 - 18:55
              +1

              @luffyex2010: Yeah but once it is released. There will be no stock and they'll accept sales.

            • Pro-crastinator on 09/10/2020 - 12:27

              @luffyex2010: I was joking about how despite the governments idea that tax cuts would result in increased spending, that this is not the case…

              and that what appears to be an increase in spending is actually just profiteering individuals on-selling in-demand items (probably to someone who would have bought a PS5/Xbox anyway)… which results in one person putting their tax cuts, into another persons savings account - ie. all roads lead to no increase in economic activity.

              I wrote Gumtree, but it could have been any other marketplace… but, good to hear Gumtree doing something about it - thanks for the info - upvote for you.

      • sareth on 07/10/2020 - 13:32
        +1

        Enriching foreign companies?

        • AlexF on 07/10/2020 - 19:56
          +1

          Let’s be honest, vast majority will end up in China. So, this is Josh pandering to his next employer. 你好

  • Arcticsoldier on 06/10/2020 - 09:33
    +24

    unfortunately the majority of working class are 90k and below so if you want them to spend, you need to give them more in their pockets. but as everyone else has said, if they dont have jobs, they cant spend, so it goes into savings

    • dasher86 on 06/10/2020 - 09:49
      +12

      A lot of people who get a tax refund use it to buy stuff they can't afford thinking that it is a windfall gain rather than offsetting their expenses over the year.

      • bobbified on 06/10/2020 - 11:29
        +5

        I'll admit to this! 🤣

      • Coops1 on 07/10/2020 - 08:03

        Understand windfall gain and spend spend spend, but what is offsetting? Maybe that’s the issue.

        • dasher86 on 07/10/2020 - 09:02
          +2

          "off setting" - is turning your appliance to "Off" hence why it is called the offsetting. - eg. Coops1 turned the appliance to the highest setting and then to off.

          • Coops1 on 07/10/2020 - 10:36

            @dasher86: Got it! I know all about turning things off, just gone onto tariff 93 power in Tas (Peak/OFFPeak). Rest of family finding it hard to learn.

    • eek on 07/10/2020 - 10:50
      +4

      Isn't this because the majority of people who run their own businesses pay themselves the minimal amount possible? All their daily expenses get pushed through whatever business they have and they only pay themselves the minimal amount (depending on structure) to minimise income tax. I believe they are leveraging a lot of pre-tax dollars off their businesses so the figure is skewed. If you were a regular PAYG employee on that sort of salary, then it's just a kick in the nuts.

      • netjock on 08/10/2020 - 10:17

        If it was that good I'm surprised not everyone is getting an ABN and pushing the cost through "the business"

        • Shleepy on 08/10/2020 - 13:37
          +1

          Only, richer and very well paid people do of course. Corporate tax rates at 30%. Second tier marginal income tax rates at 32.5%. At some point it makes sense to become a contractor and charge under a labour hire agreement. It does not make economic sense for many people, but I have seen many well paid executives, partners, and the like do so. You then "charge" your own business in a way to mimimise taxes overall.

          There is a reason wealthy people in Australia invest using investment holding companies, while wealthy investors in the United States have tended to invest directly. And, if you wonder why wealthy people are so keen to get that corporate tax rate down, it is also because it effectively decreases their own highest marginal income rate.

          • netjock on 08/10/2020 - 13:44

            @Shleepy:

            And, if you wonder why wealthy people are so keen to get that corporate tax rate down, it is also because it effectively decreases their own highest marginal income rate

            No point because franking credits are passed through in Australia so what you gain in lower tax rates you lose in franking credits unless you want to pay yourself low wages all your life.

            it makes sense to become a contractor and charge under a labour hire agreement. It does not make economic sense for many people, but I have seen many well paid executives, partners, and the like do so. You then "charge" your own business in a way to mimimise taxes overall.

            Contractors in this country are same marginal tax rate as employees. You also cannot charge for services not rendered. I think you are confusing companies with family trusts.

            • Shleepy on 08/10/2020 - 14:08

              @netjock: I apologise. I meant to infer, as you imply, as a consultant. One gets hired or paid as a consultant to undertake work that is functionally identical to labour hire, but is paid to a company. So for example, I am a $500,000 a year executive. I can be paid into my corporation which pays 30% tax ($150,000) but can also distribute/pay me in a way to minimize my total tax bill -and I believe can send me franking credits to make it even more valuable. Or, I can go PAYG and just pay the $198,000 plus medicare levy every year.

              • netjock on 08/10/2020 - 14:21
                +1

                @Shleepy:

                So for example, I am a $500,000 a year executive. I can be paid into my corporation which pays 30% tax ($150,000) but can also distribute/pay me in a way to minimize my total tax bill

                Purely by numbers:

                $500k you need to pay GST of $45k. It depends on what input credits you have for expenses. I'd doubt you can get it up to $100k ($9k input credit).

                That $500k is now $464k.

                IF you pay yourself $200k which is an expense

                Company left with $264k

                30% company tax on $264k is $79k

                45% personal tax on $264k is $118k

                Here is the problem. If you are making $500k now and you have THAT much assets at which point in the future would you drop into the lower tax brackets to be able to pay yourself all the retained profits?

                If you are always in the 45% bracket then there is high likelihood you are just warehousing money and denying yourself the ability to enjoy it.

                Yes you can go and buy houses, cars, yachts and private planes on the company but it is really never yours. You just have use of it until the company goes bust. At least in bankruptcy you get to keep your home but if it is owned by the company and the company goes bust it is gone.

        • eek on 08/10/2020 - 14:48

          Yes. You'd be silly not to have one. Owning a small business in Australia is a dream. It's single currency, and there's such a big blind spot when it comes to cash income nobody cares or really checks. Government is currently dishing out free cash, and massive instant write offs to business owners it's an absolute windfall Owning a small business isn't really to make money but to maximise tax benefits and write off as much as you can (minimise tax).

          • netjock on 08/10/2020 - 15:09
            +2

            @eek:

            Yes. You'd be silly not to have one. Owning a small business in Australia is a dream. It's single currency, and there's such a big blind spot when it comes to cash income nobody cares or really checks.

            LOL. You are dreaming. First of all 35% - 40% of businesses don't survive over 4 years. Of those that survive how many make a good profit? 76% are micro businesses with 1 - 4 staff.

            Link supplied

            Government is currently dishing out free cash, and massive instant write offs to business owners

            What is this free cash?

            Instant write off is in year tax deduction instead of having multi year depreciation deduction. It is just a cash flow play. Don't think it is magic money.

            Even if you go and buy a $150k Landcruiser. You still need to somehow get $150k to pay the dealer. Than you file your GST BAS to get your GST refunded. Then company tax return to NOT pay $0.30 per $1 of profit (not gross revenue) in tax.

            It is really coming up with the $150k up front that is hard. It isn't like you want a Landcruiser then ATO tips in 30% up front, the GST up front then you pay the net. Sure you can take out a loan but you need to find a bank that will lend you that much.

            • eek on 08/10/2020 - 20:13

              @netjock: The last round that went through was the business adaption grant. Fill out a form, wait and receive free funding. It's as easy as that.

              As for instant write offs, yes it's a cashfow thing, but it isn't available to a PAYG employee. Hypothetically an employee could deduct an expense, reduce their taxable income to zero if they has savings to live on.

              Buying toys,yachts, and luxuries as a business is always how it's done. Nobody wants to own actually anything- it's just silly. People who own companies always employ their family members and pretend they do book-keeping or something, pay them that way.

              Well I guess you can't instantly write off a 150k car, but why would you? Just lease it so you always have the newest Bentley to show off and is less of a burden cashfow wise. Next time go and check the rego of 10 $150k cars. Almost none of them will be purchased outright and registered privately.

              • netjock on 09/10/2020 - 13:54

                @eek:

                The last round that went through was the business adaption grant. Fill out a form, wait and receive free funding. It's as easy as that.

                Link to this so called grant that is so easy to get?

                As for instant write offs, yes it's a cashfow thing, but it isn't available to a PAYG employee. Hypothetically an employee could deduct an expense, reduce their taxable income to zero if they has savings to live on.

                And savings aren't coming from after tax income from prior years. To pay more tax prior year and zero tax this year just plays with the averages. Savings don't fall from the sky.

                Buying toys,yachts, and luxuries as a business is always how it's done. Nobody wants to own actually anything- it's just silly. People who own companies always employ their family members and pretend they do book-keeping or something, pay them that way.

                If you own it under your name then it is private use, no tax deduction. Everyone wants to own stuff just ask the property investors on $40k a year.

                Well I guess you can't instantly write off a 150k car, but why would you? Just lease it so you always have the newest Bentley to show off and is less of a burden cashfow wise. Next time go and check the rego of 10 $150k cars. Almost none of them will be purchased outright and registered privately

                You believe that leases don't have an implied interest rate for financing? Car leasing companies are not doing it for charity. Don't forget if you lease you can't use it as collateral for anything, you end up with a contractual liability. Just try it out with a home loan application. Instead of putting a reduced value car as an asset, you have to put cost of servicing lease monthly which will reduce you borrowing capacity.

                Those who lease and swap cars every few years aren't doing it for their finances, they are doing it for perception of success. It is a hustle and a con job. It is like those successful million dollar property investors trying to sell you a $3k property investment course which basically teaches you negative gearing, borrowing 90% with LMI, pay it off and use equity to buy more property. If someone is going to sell you a really good money making idea then you have to question whether there is actually better money in selling courses.

                • eek on 09/10/2020 - 14:17
                  +1

                  @netjock: Here you go: Round 1 is closed, round 2 is open, but a bit different now: https://www.business.qld.gov.au/starting-business/advice-sup…

                  Yes obviously leasing is not a free service, however if you can service the payments, why not lease a car for yourself and a car for the family to do the school runs or go camping with etc. Put it this way. Everyone I've ever known who operates a business regardless of if they're in the medical field, tradespersons, consultants, cafe or grocery shop owners has always utilized their business entity for things not directly related to the operation of the business. What I'm trying to get at is operating as a "business" compared to being a PAYG employee opens up a whole raft of tax benefits plus the ability to bend the rules.

                  • netjock on 09/10/2020 - 15:55

                    @eek:

                    Here you go: Round 1 is closed, round 2 is open, but a bit different now:

                    Queenland only unlike ATO which is consistent across the country. Lets not debate the mice.

                    Yes obviously leasing is not a free service, however if you can service the payments, why not lease a car for yourself and a car for the family to do the school runs or go camping with etc. Put it this way. Everyone I've ever known who operates a business regardless of if they're in the medical field, tradespersons, consultants, cafe or grocery shop owners has always utilized their business entity for things not directly related to the operation of the business. What I'm trying to get at is operating as a "business" compared to being a PAYG employee opens up a whole raft of tax benefits plus the ability to bend the rules.

                    If you want to talk about the grey area. You don't buy 1 car for business and a 2nd car for private use unless you are big business and go strictly by the rules. People that you know have various ways of calculating business vs private use. It is moral issue, the ATO cannot run after small sums because cost of enforcement is more than cost of compliance.

                    What I'm trying to get at is operating as a "business" compared to being a PAYG employee opens up a whole raft of tax benefits plus the ability to bend the rules.

                    If you think sliding down the moral code is opening a raft of tax benefits. I just don't believe being able to bend the rules is reason to go into business. The problem whenever people get caught and smacked with a big penalty is they can never repay it because for all the dodgy stuff they have done they haven't got enough equity, whatever assets they have when repossessed is fraction of the value.

                    If you run your own business you have your own capital at risk which is a trade off with being an employee. If you don't go bust and there is a willing buyer you build equity which is the flip side.

                    The additional problem is these people who milk their business buying cars for private use is the books look unprofitable and nobody would lend them money at reasonable rates to expand because people with large amount of equity knows to not invest in people / businesses that spend all they earn.

            • trapper on 09/10/2020 - 12:32
              +1

              @netjock: I think it's more that you can make $150k profit and then buy the land cruiser with an instant tax write off.

              Now you made zero profit and paid zero tax, but still have a nice new land cruiser to drive around in and generally use as your own.

              In a few years when it's depreciated massively you can 'buy' it off the company, and the company can buy another brand new one :)

              • netjock on 09/10/2020 - 13:47

                @trapper:

                I think it's more that you can make $150k profit and then buy the land cruiser with an instant tax write off.

                You will have zero profit but an asset at $150k. It isn't both. You're just dreaming now.

                Now you made zero profit and paid zero tax, but still have a nice new land cruiser to drive around in and generally use as your own.

                You also have zero cash. For you to have zero profit you need to have expensed it all. If it was your household and you made $150k and paid $150k cash then where you going to find the money for the fuel to run it. Another dream.

                In a few years when it's depreciated massively you can 'buy' it off the company, and the company can buy another brand new one :)

                If you bought it for $150k and you instant write off, for tax purposes it becomes $0. You do have an asset but when you sell it to yourself it becomes a profit to the business.

                Some people think there is some kind of magic money tree. Take it from someone with 15 years as qualified accountant it isn't magic.

                The problem is a cashflow problem. Just like you as an employee can't pay zero tax because PAYG withholding takes away some of your cash. For you to zero tax you need to find something you can spend $1 on and be recorded as $1.30 expense (to expense your PAYG withholding too).

                As I highlighted before Project Wickenby run by tax office recovered $1bn in tax and that is all of the dodgy stuff that's happened including historical stuff they can claw back. Compared to annual corporate tax management (charging themselves intercompany high interest loans and royalties) is a way bigger problem.

                • trapper on 09/10/2020 - 16:24
                  +2

                  @netjock: You are an accountant for 15 years and you can't understand how people exploit the tax system?

                  You will have zero profit but an asset at $150k. It isn't both. You're just dreaming now.

                  Who said it was both? You get a brand new $150k vehicle with untaxed money, that is the point.

                  then where you going to find the money for the fuel to run it. Another dream.

                  Another business expense! lol So your fuel gets purchased with untaxed money too.

                  While your at it why not fill the boat up on the business account too, another untaxed purchase for personal use.

                  • netjock on 09/10/2020 - 16:36
                    -1

                    @trapper:

                    You are an accountant for 15 years and you can't understand how people exploit the tax system?

                    LOL you still don't get it. I am not the type who will start telling people do this or do that, because if you don't know what you are doing you will get caught.

                    Who said it was both? You get a brand new $150k vehicle with untaxed money, that is the point.

                    LOL it isn't untaxed mate. It is just that you pay the dealer and they get taxed. Shifting the tax doesn't mean it is untaxed. I still don't understand why people look at it in isolation. You are just denying yourself ability to spend the money on something else because you locked it into a vehicle. Next you are going to tell me it is an appreciating asset.

                    Another business expense! lol So your fuel gets purchased with untaxed money too.

                    Moral bankruptcy is really the main driver to go into business. T

                    • trapper on 09/10/2020 - 17:14
                      +1

                      @netjock:

                      LOL it isn't untaxed mate. It is just that you pay the dealer and they get taxed.

                      haha, ok I actually did lol at this one

                      • netjock on 12/10/2020 - 12:43

                        @trapper: I laugh too when people think it is free money.

                        You just shifted your profit by making it into an expense and someone else records it as a profit.

                        You swapped your profit for a nice car but it is a depreciating asset. Unless it is generating a profit it is just depreciating your cold hard cash.

                        The $150k car you can measure as costing $150k paid but soon as it rolls off the yard it loses value but you're hooked on this historical feel good you handed over $150k not the lower amount you actually have once it leaves the car yard.

                        • trapper on 12/10/2020 - 23:41

                          @netjock:

                          You just shifted your profit by making it into an expense.

                          Yes, exactly. So the business owner gets to buy a cool new car to basically use as his own - using money that he never had to pay any tax on.

                          When a normal wage earner buys a car he has to pay for it with his after tax income.

                          • netjock on 13/10/2020 - 09:03

                            @trapper: Profits are cool, people aspire to be millionaires and billions. They get sucked into buying $3k classes to get rich. I don't see you selling $3k classes on being creative with your tax. Not some dude who got a new car every year because of some tax write off.

                            Learn to make money then spend it. Most people learn to spend more than they could make.

                            I am getting the feeling that some OzB people think having a business is like a magic money tree.

                            The exact advice we give to people about cars in OzB applies the same for business. Just because you get a tax deduction doesn't mean you should buy it. You should have a look at how many businesses fail because they go and buy stuff they don't need and forget they have a tax liability.

                            Number one problem you have with any business is cash flow and working capital. You take that and go and buy non productive assets and you are screwed. You know dodgy builders? Generally they have nice cars, they just cut corners.

                            • trapper on 13/10/2020 - 10:45

                              @netjock: You're being dismissive now.

                              It's not about buying a car you don't want or need just for a tax deduction, that's just silly.

                              If high income earner wants to buy a new $150k car it's going to cost him $150k after 45% income tax has been deducted. Equivalent to $272k off his before tax salary.

                              A business owner can buy the same car with $150k untaxed money. So he gets up to a 45% discount on the purchase.

                              • netjock on 13/10/2020 - 10:56

                                @trapper:

                                If high income earner wants to buy a new $150k car it's going to cost him $150k after 45% income tax has been deducted. Equivalent to $272k off his before tax salary.

                                You do make me laugh. Salary earner just needs to turn up for work, gets paid and give a cut to the ATO.

                                A business owner can buy the same car with $150k untaxed money. So he gets up to a 45% discount on the purchase.

                                As a business owner you wouldn't be able to claim from home to work place just like normal employees, if you pay yourself a wage then you are an employee. It is just people claim it anyway, I am not sure existing in the grey is a clear argument that is a benefit.

                                Business owner to make $150k to buy a car before paying yourself needs to make a profit of $250k minimum. The $250k requires you to turn up for work and commit capital. How much working capital do you think is required?

                                You don't think turning up for work and committing hours with zero capital outlay as a business is going to drop $250k and you get a tax deduction? That would make a joke of being in business. Zero risk and get a tax deduction.

                                You must have acres of magic money trees. I'll make sure whenever I meet another one of these dreamers I ask them to DM you.

                                • trapper on 13/10/2020 - 11:26

                                  @netjock: More dismissal and obfuscation, why can't you be honest?

                                  A business owner can pay himself an extra $273k, lose up to $123k to personal income tax, and then buy the car with the remaining $150k.

                                  or

                                  The business can buy the car as a business 'expense' so the $150k is no longer taxed, leaving that extra $123k in the business to use for other 'expenses'.

                                  Either way the owner gets the same nice car to drive around in and treat as his own. It doesn't make any difference if the business technically 'owns' it.

                                  • netjock on 13/10/2020 - 11:52

                                    @trapper:

                                    Either way the owner gets the same nice car to drive around in and treat as his own. It doesn't make any difference if the business technically 'owns' it.

                                    Your dishonesty right there to see. "Treat as his own" basically means non company car, ATO would say thanks but here is back tax + penalty. Using grey area because it isn't rigorously enforced to win an argument. Clap clap. You pretend there is a magic money tree too? Your name checks out too "trapper" trying to set traps but really it is just these pub facts, it'll be right, buy a car, put it under the company, ATO won't come looking.

                                    Not comparing apples with apples.

                                    Employee and Business owner are two different risk profiles and two different treatments.

                                    Call your so called disincentives of being taxed more as an employee the cost of buying in for not having to put up the capital and putting at risk person assets when the company goes bust.

                                    I have called you out previously that all you look at is the tax because you believe it is a sure win for your argument. Problem is that you're looking at the tail not the dog.

                                    • trapper on 13/10/2020 - 12:39

                                      @netjock:

                                      "Treat as his own" basically means non company car, ATO would say thanks but here is back tax + penalty. Using grey area because it isn't rigorously enforced to win an argument. Clap clap.

                                      Yes, that's why I call it call it exploiting or scamming the tax system - it's not good.

                    • eek on 12/10/2020 - 10:50

                      @netjock: So if a client came to you, as a circa 200k pa. PAYG employee and wanted to reduce their taxable income, what would you suggest? Resign, become a consultant under a PTY LTD (assuming they can get around PSI rules) instead?

                      • netjock on 12/10/2020 - 12:03
                        +1

                        @eek:

                        Resign, become a consultant under a PTY LTD (assuming they can get around PSI rules) instead?

                        But you can't so you don't really have a point but I'll entertain you with some simple arithmetic.

                        For 200k you wouldn't. The math from.

                        Your average tax rate is only 30% up to $100k. Company tax rate, lower rate 27.5%.

                        I am not sure if most people will make $200k and live off $100k. Don't tell me buying a $100k car on the company is living because it doesn't fill your belly or pay your mortgage.

                        From $100k - $180k personal tax rate (37%) is only 9.5% higher than company rate ($7.6k) The additional $20k you would be saving $3.5k so total $11k.

                        Company tax return done by an accountant is $1,600pa and GST BAS is probably another $100 per quarter. so really you're saving somewhere $8k.

                        Some how you're going to try to fit in an expensive Landcruiser for business use in there because all you do is go from home to the office but lets just pretend you're going to work for a tax deduction. All this work / dodging to save $8k. If at $200k you are worried about less than 5% difference then you have bigger problems in life.

                        For doing all this so you can buy a fancy car on the company but don't forget it just depreciated your cold hard cash that could be better making return.

                        Like most OzB people, you're just dreaming there is some magical pot of gold.

                        • eek on 13/10/2020 - 10:33
                          +1

                          @netjock: The idea of having a company is you don't actually turn a profit and consume as many expenses within the business as possible. If it happens to turn a profit then great, remember to pay yourself. There's revenue then there's actual profit. As an employee, your revenue is literally the $200k salary you receive. If you ran a company, then your revenue wouldn't be restricted to just a measly $200K a year like a peasant employee.

                          Each quarter, sit at a table (or virtual zoom table) with 10 of your mates and invoice each other. People have been doing this for years! That gives you the revenue to write off toys and other random expenses to support your lifestyle :). It doesn't matter that you don't actually own those shiny toys - who would want to own a depreciating asset like a car or boat anyway?

                          • netjock on 13/10/2020 - 10:46
                            -1

                            @eek:

                            The idea of having a company is you don't actually turn a profit

                            You don't need to have a company for that to happen. A lot of people live pay cheque to pay cheque already. Charities basically operate on the basis of spend all you got.

                            Each quarter, sit at a table (or virtual zoom table) with 10 of your mates and invoice each other. People have been doing this for years!

                            First of all you need to make some profit (that is having revenue). You can't invoice each other for revenue that doesn't exist. (You too are a believer in the magic money tree)

                            Stop romanticising the idea that having a company is like a boys club love in. Those who run a business like it is a basement boys den aren't even in business.

                            who would want to own a depreciating asset like a car or boat anyway?

                            If your company owns it then effectively you worked for it, so you have a depreciating asset. People who get disconnected thinking a cheap company registration is someone else's business is bound to fail.

                            It can be observed by looking at big spenders, how they spend money:

                            • they didn't work for it (trust fund, handed down money),
                            • illegal source (use it because you are going to lose it at some point anyways)
                            • Or they are just putting up a front to take other people's money (glossy brochures selling you a course on how to become rich by giving them all your money)

                            It is getting a bit boring when you keep talking about this magic money tree that will give you money to buy a tax deductible car.

    • cristobaljames on 07/10/2020 - 23:58

      Is the $1080 in addition to the existing $1080 already being given for middle income earners?

      • avoidfullprice on 08/10/2020 - 14:05

        This 1080 tax cut is for people earning 45k or more.

        The existing 1080 offset is for people earning 45-90k. This will be gone after this FY.

  • SnowDragon on 06/10/2020 - 09:33
    +6

    Hopefully by the time I lodge my tax return next year there'll be plenty of deals for the 3xxx series floating around.

    • gromit on 07/10/2020 - 17:56

      The way its going with NVidia at moment if you want the card delivered by next years tax return you might need to get your preorder in pretty soon.

  • DingoBilly on 06/10/2020 - 09:41
    +14

    It's a weird tax cut - definitely helps middle-high income earners most of all who as far as I understand, are more likely to save that money than spend. I know I am likely to put this money towards stocks/savings rather than changing anything (I was going to buy a PS5 and a new TV with it, but that was irregardless of this tax cut or not).

    If you targeted low-income then you'd have a better chance of them spending it as it's genuinely new money that they didn't have before that they can buy new stuff with.

    • payton on 06/10/2020 - 10:11
      +17

      What is weird about it? Being part of the middle class doesn't preclude one from discretionary spending. If anything, the toys of said people tend to be more expensive. As they say, as your income rises, so does your taste for finer things and ergo, expenditure. Plus we're here in ozbargain, its pretty much a buyer's club for new gadgets and tech, and xmas shopping season & black friday etc is about to start.

      Some investments are also not too different from gambling, and people get into these for a quick payout …. which they then immediately spend on consumer goods.

      • Ghost47 on 06/10/2020 - 22:05
        +8

        Not everyone succumbs to lifestyle creep as their income rises though. Your comment about OzBargain is contradictory to the poll where the majority say they will save their tax cut. I would postulate that instead of OzBargain being a "buyer's club for new gadgets and tech etc." that it's more of a site for people who are budget-conscious and will spend if presented with a good deal. I'm a middle income earner and I know I'll either invest it or put it into my savings.

        The fact is that if lower earners are given money, they are more likely to spend it, just like how they went out and spent the $750 stimulus or how some of them withdrew $10,000 from their super to have a "nest egg" (fact: it already was a nest egg, withdrawing it does a lot more damage then leaving it but that's another story). Rich people who get more tax cuts aren't necessarily going to spend their money in the economy.

        These tax cuts will do little to stimulate the economy, do a bit of reading and you'll see that.

        • dasher86 on 07/10/2020 - 09:07
          -3

          $10,000 from their super to have a "nest egg"(youtube.com) (fact: it already was a nest egg, withdrawing it does a lot more damage then leaving it but that's another story)

          eh? Cash is king, a nest egg is only a 'nest egg' when it can be used when required.
          If you are able to access it now for a limited time and need it for the short term why wouldn't you take that opportunity?

          You may not be around when it comes to use that nest egg called super later.
          And in this country if you don't have a large super balance when you retire you get funded from the government and tax payers anyway.

          Starve now or get access to a pension later and live a more meagre retirement

          • Ghost47 on 07/10/2020 - 09:50
            +2

            @dasher86: I have no issue with people who had to do it, but there are people who did it without really, really needing it (I.e. actually not being able to buy food if money was not withdrawn).

            By withdrawing super especially when the market tanked you've locked in your losses and lost all the gains that were previously made.

            No one knows what the pension will look like in 30-40 years. I personally don't think claiming the pension is an honourable thing to do, nor is it anything to brag about as the pension basically keeps people alive, it's a very low standard of living on the pension. The assumption shouldn't be "I might die suddenly so might as well live now" it should be "I'm going to live until 80 so I will make sure my retirement is enjoyable" notwithstanding some sort of terminal disease.

    • [Deactivated] on 06/10/2020 - 10:41
      +13

      Damn those people who save so they can support themselves in dire times.

      God bless the perpetually dependant.

    • bobbified on 06/10/2020 - 12:06
      +23

      Hasn't every other budget targetted the low income earners? I got too used to hearing the terms Family Tax Benefits, Childcare rebates, Low income rebates, Parenting payments,blah blah blah. This time, it benefits more people, in proportion to what they earn and what they currently pay in tax, rather than a specific group.

      • b0b0 on 06/10/2020 - 14:40
        +4

        can't agree more.

      • brad1-8tsi on 06/10/2020 - 15:10
        +8

        No, it's mainly targeted what I would describe as middle income earners (people like me) that were on the ~30% step and those on higher incomes (>$150k).

        Those on zero tax rarely got any changes. I think the tax free threshold went up by $1000 a few years back.

        If the governement lifted the tax free threshold it would benefit all tax payers.

        • Joku on 07/10/2020 - 10:48
          +2

          This is true.

          The tax free threshold is unfortunately being held back by poor superannuation system design though so I don't expect much until that changes.

          Labor tried fixing it but wasn't willing to admit the real problem, chose to attack what they saw as an easier target in "rich persons" franking credits instead of "their" precious Super system. Flawed problem definition -> deeply flawed solution -> patched up policy on the run in response to highlighted problems were arguably even more deeply flawed -> lost them the unlosable election -> apparently can't talk about the genuine underlying problem now for god knows how many years.

          • one man clan on 07/10/2020 - 11:17
            +1

            @Joku: What is the problem with the super system? (genuine question)

          • brad1-8tsi on 07/10/2020 - 14:43

            @Joku: I don't understand the correlation between the TFT and superannuation but I do agree that the superannuation system has flaws, not the least of which is the expectation that we will all be superannuation experts and know which fund to pick, whether to get insurance and what investment strategy to use.

            Plus the absolute travesty that allows employers to retain super deposits for as long as they feel like without penalty or simply not pay at all and disappear.

            • Joku on 07/10/2020 - 22:11
              +1

              @brad1-8tsi: Consider a wealthy adult couple with 4 parents who've passed preservation age. Parents decide to start shifting all cash/investment wealth beyond their PPoR's into Super that they hadn't already contributed, after/at/near-to preservation age. They do this using the fairly loose non-concessional contribution limit and the multi-year bring fwd rule, which over 3yrs (potentially 2yrs and 1 day with ideal financial year tick-over timing) each parent could dump up to $500,000 of their non-super non-PPoR financial assets, ie $1mill per couple, enough to cover most cases. Where that's not enough, you just start earlier and do it for more than 3yrs. End result: Pension phase super for most families has big enough limits for all or most of their wealth beyond their PPoR equity, results in 0% investment income tax, 0% capital gain tax, 0% pension payment tax for payments out of pension phase super (also 0% lump sum withdrawal tax if you choose to do any of those). There's no limit on how much you can pay out here, it's not like the pro's vs con's debate of contributing to super earlier in life. The only catch is existing personal investment assets potentially having large unrealised capital gains, maybe you don't want to realise those capital gains.

              The problem is this results in potentially down to $0 assessable income on their personal tax returns for a couple earning potentially a 6 figure investment income. Who might want to use abuse that personal income clean slate? The wealthy adult kid with investment income in a discretionary trust. Pretty ridiculous system don't you think when a wealthy adult kid can use his parents, potentially even when they're even wealthier, each as a 0% tax haven for the first ~$20,000 per parent, before moving on to the next lowest tax bracket.

              Shorten started out whinging about this before it turned into an attack on refunded franking credits. The trouble is refunded franking credits only go to low income earners and not all of them are well off and just deliberately reducing their taxable income. For example a household who's had their primary income earner pass away, maybe they had life insurance designed to produce enough income under current tax rules, enough to get by modestly. Well tough luck to those families, under the Labor plan they'd shift from ~0% tax to ~30% tax.. kinda significant for a low income household don't ya think? God knows what goes on behind closed doors, but I suspect Labor understood this and decided they didn't care about those kind of cases as much as they cared about protecting "their" Superannuation legacy. I know I'm Labor bashing a bit here but they were the only decent hope of resolving this issue and they seriously disappointed, meanwhile Libs pretend there is no issue - but I still think it impacts their desire to lift TFT.

              • netjock on 08/10/2020 - 10:21

                @Joku:

                They do this using the fairly loose non-concessional contribution limit

                Non concessional is after tax. People can do what they want with after tax money. You make it sound like a tax dodge.

                I just don't get people who seems to love double taxation at every turn.

                The problem is this results in potentially down to $0 assessable income on their personal tax returns for a couple earning potentially a 6 figure investment income.

                If you can and not have to depend on the tax payer funded pension (that is income from businesses that create jobs and pay taxes) then you should probably get a prize. Better than all those who spent all their money and come cap in hand to the tax payer in their old age.

                • Joku on 08/10/2020 - 11:15
                  +1

                  @netjock: Regarding the non-concessional contributions, you've misunderstood, not everything I explained was claimed to be a tax dodge, a lot of it was explaining the reasoning, general lack of cons, and general process of setting things up to potentially get not only 0% overall tax rate for wealthy boomers but also potentially 0% tax for their wealthy kids' investment income.

                  Your gripe about double taxation seems to relate to your false assumption of what I was saying. Looking at my actual point, our tax system is heavily based on income tax where expecting investment income to be taxed doesn't really come close to the definition of double taxation.

                  You want prizes for wealthy people paying no tax? Like the 10's of thousands they dodge in tax every year isn't already an excessive prize.

                  Anyway I don't want to waste any more time on this. Easy for people to take my comments out of context, and sadly very normal for people to choose a stance that's focused on looking after #1 and to choose to believe they aren't doing wrong by fellow Australians regardless of their circumstances.

                  • netjock on 08/10/2020 - 12:46
                    +2

                    @Joku:

                    Looking at my actual point, our tax system is heavily based on income tax where expecting investment income to be taxed doesn't really come close to the definition of double taxation.

                    Hmmm you seem to not understand my full franked dividends with 30% tax credit I still have to pay the difference on my income tax. If I was mega rich like $1m with 3% net dividend (ASX200 index) + franking credits. Just because I am getting investment income (that I purchased with my after tax income) which so happens the franking credits cover my tax bill and I get a refund doesn't mean zero tax on investment income. I suggest you figure yourself out. Being a qualified accountant for 15 years I can firmly say you miss how the mechanism works. The purpose of franking credits is to avoid double taxation (tax at company level, then at personal level) but it does NOT mean investment income is untaxed

                    You want prizes for wealthy people paying no tax? Like the 10's of thousands they dodge in tax every year isn't already an excessive prize.

                    You claim a tax dodge but why isn't there more high profile cases of individual tax dodging? Could it just be the case that there really isn't that many wealthy tax dodgers or else ATO could just harvest them for money year on year. Project Wickenby

                    I would suggest corporate tax dodging is a bigger problem

                    Anyway I don't want to waste any more time on this. Easy for people to take my comments out of context, and sadly very normal for people to choose a stance that's focused on looking after #1 and to choose to believe they aren't doing wrong by fellow Australians regardless of their circumstances.

                    Unfortunately you put the wrong context and decided to take a good swipe at topics and people you don't know that much about. I'm just putting in all the corrections before everyone starts to believe your personal alternative facts.

                    • Joku on 08/10/2020 - 19:26
                      -1

                      @netjock: Yeah you've just further proven you're not understanding sorry.

                      On the bright side, the strategy isn't really for you anyway from what you described as super rich and the dividend payout ratio you're playing with (which is pretty normal, but there are less common cases with private business owners having upwards of 20%pa grossed up divs which obviously drastically changes the equation). You should still be annoyed that it exists and richer people are taking advantage of it though, but 1st you need to understand what I described.

      • eek on 08/10/2020 - 14:50
        +1

        Agreed. I've never really paid any attention to these budget announcements as it nearly always never applied to me or was of any benefit to me. Everyone in the top marginal tax bracket has been shafted so hard and so long glad there is some upside this time.

  • Fredfloresjr on 06/10/2020 - 09:45
    +2

    I will put it in my savings……………………………. Then deposit to nursing homes in the future.

  • dust on 06/10/2020 - 09:46
    +10

    If we spend the money on things being manufactured and delivered from overseas that doesn't really help the economy much.

    • mskeggs on 06/10/2020 - 19:51
      +7

      Yes, it would be better to spend it on dinner out or a local holiday than a tv or Xbox.

    • PopCounty on 07/10/2020 - 10:59

      Yeah true.
      Better could be to allow local purchases to be tax deductible for upto certain amount. Non essential items like cloths, dining, toys and all but from local resellers and via physical stores. I mean something like that so that ppl can actually go out, spend and make it once off tax deductible in next claim.

      • netjock on 08/10/2020 - 12:50

        Most of clothing and toys from from overseas. There is very few things made in Australia.

        Maybe eat out to help out like in the UK

  • whooah1979 on 06/10/2020 - 09:52
    +1

    Shouldn't they raise the tax to pay for the zombie companies or perhaps stop the bleeding by shutting down JK?

    • serpserpserp on 07/10/2020 - 18:59
      +1

      Bleeding to who?

      It would be a blood letting if you switched off JK tomorrow.

  • payton on 06/10/2020 - 09:56
    +10

    the one time honest hardworking taxpayers get a nice little bonus (for a lifetime of subsidising the NEET-for-lyfe crowd) , people complain about it :|
    yes some people are out of work, but those who still work don't matter?

    https://www.abs.gov.au/statistics/labour/employment-and-unem…
    Employed people 12,583,400
    Unemployed people 921,800

    • b0b0 on 06/10/2020 - 10:55
      +1

      I am with you. Finally get a nice little bonus :D

    • Phlume on 06/10/2020 - 11:27
      +13

      That's a very narrow minded look on what your taxes are paying for yearly. I'm sure as a tax payer you would have received the breakdown statistics on what taxes are spent for and I'm fairly certain it mainly went towards the age pension for the elderly.

      • brendanm on 06/10/2020 - 11:47
        +2

        I don't believe payton mentioned anything about where tax money goes? Simple stated that the moment people who actually work hard for their money get something, the whinging starts.

      • avoidfullprice on 06/10/2020 - 13:20
        -2

        I'm sure as a tax payer you would have received the breakdown statistics on what taxes are spent for

        Didn't receive one for last tax return. You?

        • Poppin on 06/10/2020 - 13:33
          +2

          You should have, it's called the Tax Receipt. Health care was about 20%, aged pension about 16%.

          • avoidfullprice on 06/10/2020 - 14:19

            @Poppin: Have not received it for last FY, electronically or in mail. Oh well :)

            • brendanm on 06/10/2020 - 14:34
              +5

              @avoidfullprice: Just assume that approx 80% is wasted on bureaucracy, the other 20% goes to politicians champagne breakfasts etc.

              • Shleepy on 08/10/2020 - 13:41
                +1

                @brendanm: I guess that is a step up where the average corporation wastes 20% on its employees, and the other 80% on executive champagne breakfasts etc.!

        • brad1-8tsi on 06/10/2020 - 15:12

          Everyone gets a tax breakdown report

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