It’s Australia’s federal budget week where we get an insight into the country’s finances. Income tax cuts are reportedly going to be brought forward.
Who will benefit from the tax cuts?
According to various media reports such as the Australian Financial Review and News Corp (ASX: NWS), Aussies are going to get tax cuts earlier than expected.
Tax cuts had been legislated to start in a few years, but these cuts are going to be brought forward to help households and the economy.
People earning over $90,000 annually will get a tax cut with the threshold for the 37% tax rate increasing from $90,000 to $120,000.
The 19% tax rate will still start at $18,200, but the upper end of that bracket will be increased to $45,000.
One of the key parts of this plan is that the tax cuts will apply retrospectively from 1 July 2020, meaning everyone who these cuts apply to will be helped immediately.
However, stage 3 tax cuts may not get passed because Labor doesn’t want there to be a flat 30% tax rate for between $45,000 and $200,000.
There are other changes expected in the budget. More first home buyers will be helped to get into a newly-built property, which should be helpful for the construction industry.
Money will be spent on various infrastructure projects including road and rail.
The government will help new jobs by paying half of the wages of any new apprentices, with up to $7,000 per quarter to businesses.
Eligible businesses will have a bit more flexibility with certain fringe benefits tax items. Smaller businesses will benefit from a few taxation changes – not income tax cuts, but improved rules on a few different things.
There will be an investment by the government into manufacturing projects. More funding will be given to aged care too.
Summary
With government stimulus starting to wind down, such as jobkeeper, I think it’s a good idea for the government to provide more help to households and the economy because the country is not completely back to normal yet with international borders still shut and other COVID-19 impacts.
There are various businesses which may react to this news. McMillan Shakespeare Limited (ASX: MMS), SG Fleet Group Ltd (ASX: SGR) and Smartgroup Corporation Ltd (ASX: SIQ).
I wouldn’t be surprised to see construction names like Brickworks Limited (ASX: BKW), CSR Ltd (ASX: CSR) and Metcash Limited (ASX: MTS) react this week.
Banks such as Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC) will also be watch this week.
It’s Australian-focused ASX dividend shares like Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) which could benefit in various ways. I wrote about the company here.
