Tax cuts and childcare: Everything we know so far about the 2021 Budget


Low and middle income earners, working parents, and job seekers are three groups set to receive boosts in new measures set to be unveiled by Treasurer Josh Frydenberg in next week’s budget.

The Treasurer, who will deliver his second budget in six months after last year’s was delayed until October due to Covid-19, has already promised more big spending this time around as the government tries to bolster an economy still recovering from the lockdown battering.

‘We won’t be undertaking any sharp pivots towards austerity. We want more people in jobs and in better paying jobs. This is what our fiscal strategy is designed to achieve,’ he said in a speech last week.

The budget is expected to contain big spending on infrastructure, skills, tax cuts and aged care to boost jobs around the country.

Here Daily Mail Australia takes a look at some of the key changes that have been officially announced or leaked so far.

Tax cuts 

Mr Frydenberg is expected to extend the low and middle-income tax offset (LMITO), which is worth up to $1,080 and benefits people with a taxable income up to $126,000.

The bonus, which was available for the 2018–19, 2019–20 and 2020–21 income years, had been scheduled to run out in June.

However it is expected Mr Frydenberg will extend it for another year at a cost of about $7billion.

Next Tuesday Josh Frydenberg will hand down this year's federal budget with a focus on supporting the economy to recover from the Covid-19 pandemic. Pictured: Testing in December

Next Tuesday Josh Frydenberg will hand down this year’s federal budget with a focus on supporting the economy to recover from the Covid-19 pandemic. Pictured: Testing in December

How much do you stand to benefit from the low and middle-income tax offset?

How much do you stand to benefit from the low and middle-income tax offset?

‘The Coalition is always the party of lower taxes,’ Mr Frydenberg told reporters in Perth after news of the extension leaked to the media.

‘That’s our record and that will continue to be the message and the policies we deliver going forward.’

The offset is claimable when Aussies submit their tax returns. You don’t need to complete a section in your tax return to get these tax offsets – the ATO does it automatically.

Child care 

Mr Frydenberg announced on Sunday the government would spend $1.7billion of taxpayers money on a package that will bring in several sweeping changes to the childcare system.

They include a subsidy of up to 95 per cent of the cost of putting second and subsequent children aged five and under into childcare, and removing the $10,000 subsidy cap for high-income earners. 

Mr Frydenberg said the changes would not only be a massive help to hundreds of thousands of families, but also boost the number of people returning to the workforce. 

‘We are ensuring that around 250,000 families will be better off as a result of this package,’ Mr Frydenberg said. 

orking parents could soon be paying as little as $6 a day in childcare fees as part of the federal 2021-22 Budget (stock image)

Working parents could soon be paying as little as $6 a day in childcare fees as part of the federal 2021-22 Budget (stock image)

Childcare fee overhaul 

Treasurer Josh Frydenberg announced on Sunday a $1.7billion package for the childcare system. 

Families with two or more children aged five and under will be able to access several benefits to ease the burden of high childcare fees.

They will be eligible for a 95 per cent subsidy.

The $10,560 subsidy cap will also be lifted for families that earn a combined $189,390 a year.

Around 250,000 families are expected to save $2,260 a year on childcare fees. 

‘The Morrison government has made significant progress in boosting female workforce participation, as well as narrowing the gender gap. But there is still a long way to go.’   

Families with two or more children aged five and under will be able to access the 95 per cent subsidy – a boost on the current 85 per cent.  

Around 250,000 families are expected to save $2,260 a year on childcare fees. 

Families who earn a combined $110,000 and have two kids in childcare four days a week will save $95.39 a week.

Parents who earn $140,000 altogether will be able to save $124.80 per week.

‘This is a targeted and proportionate investment that simultaneously makes childcare more affordable, increases workforce participation and boosts the Australian economy by up to $1.5 billion per year,’ Mr Frydenberg said. 

Around 18,000 families are also set to benefit when the $10,560 subsidy cap is lifted.

The change will be available for families who earn up to a combined $189,390 a year. 

Under the current plan, high-income earners have been forced to pay the full childcare fees after passing the $10,560 threshold. 

Minister for Education Alan Tudge said the cap had been a barrier for some parents who decided against returning to work.

‘We’re getting rid of that because we know from families it becomes a barrier from working more,’ he said.

‘By getting rid of that, people can have confidence to work the additional days without hitting the limit.’ 

The changes include providing a 95 per cent subsidy for second and subsequent children aged five and under, and lifting the $10,000 subsidy cap for high income earners (stock image)

The changes include providing a 95 per cent subsidy for second and subsequent children aged five and under, and lifting the $10,000 subsidy cap for high income earners (stock image)

Tax breaks for beer and spirit makers

The government will increase the amount of tax which small brewers and distillers can claim back.

The maximum excise refund – which refunds brewers for tax they paid on product which they ended up throwing away – will increase from from $100,000 to $350,000 per year.

The change will cost taxpayers $255 million per year and will come into play on July 1.  

The government will increase the amount of tax small brewers and distillers can claim back

The government will increase the amount of tax small brewers and distillers can claim back

Currently, eligible brewers and distillers are entitled to a refund of 60 per cent of the excise they pay, up to an annual cap of $100,000.

The change will give them a full refund up to $350,000, matching the Wine Equalisation Tax (WET) Producer Rebate.

There are around 600 brewers and 400 distillers across Australia, with around two thirds operating in rural and regional areas. 

The announced changes were intended to help brewers and distillers invest and grow, boosting jobs in an industry that employs around 15,000 Australians. 

Aged care 

A Royal Commission into aged care released its final report in March, detailing ways for the system to be improved after shocking incidences of abuse and neglect.

On the day the report was announced Scott Morrison described the upcoming budget as an ‘aged care budget’ and promised to pour significant resources into the sector.

Sources have said the package will exceed $10billion over several years.

Scott Morrison described the upcoming budget as an 'aged care budget' and promised to pour significant resources into the sector

Scott Morrison described the upcoming budget as an ‘aged care budget’ and promised to pour significant resources into the sector

The royal commission recommended the government should provide $300 million in 2021–22, $600 million in 2022–23 and $1 billion in 2023–24 for capital grants for building or upgrading residential aged care facilities.

It also recommended a $9.6 million increase for the rural health outreach fund and a $100million-a-year Aged Care Workforce Fund to support staff training.

The report also suggested increase the payments made to each approved provider of residential aged care by $10 a day per resident. 

Jobs drive 

The budget will contain a series of measures aimed at driving down the unemployment rate.

The rate is now 5.6 per cent with 1.23 million people receiving JobSeeker or Youth Allowance benefits, about 400,000 more than before Covid-19 struck last year. 

Mr Frydenberg has hinted that we could see more investment in skills and training after he last week received a Treasury report that said wages will not grow until the unemployment rate is below 5 per cent.

In September Treasury said the unemployment rate would need to be ‘comfortably’ below six per cent for wages growth to occur.

A new Treasury paper now puts NAIRU – or the rate of unemployment below which inflation is expected to accelerate over time – between 4.5 and five per cent.

‘This lower estimate of the NAIRU means a lower unemployment rate will now be required to see inflation and wages accelerate,’ Mr Frydenberg said in a speech.

‘In effect, both the RBA and Treasury’s best estimate is that the unemployment rate will now need to have a four in front of it to deliver this outcome.’

Some 1.23million people are receiving JobSeeker or Youth Allowance benefits, about 400,000 more than before Covid-19 struck last year

Some 1.23million people are receiving JobSeeker or Youth Allowance benefits, about 400,000 more than before Covid-19 struck last year

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