Touring in caravan or holidaying in your camper trailer is a relaxing, carefree enjoyable idea. Analysing the Federal Budget - that sounds far from a relaxing way to spend one's time. But they do have something in common. If you're considering seeking finance to purchase a caravan, camper trailer or any other type of RV it makes sense to stay across the financial scene and be up to date with the opportunities are available to you. The Federal Budget sets the scene and establishes many parameters for both the nation and that may impact your individual financial situation.
We’re saving you the time of having to analyse the complete budget papers and providing a brief tour through the aspects of the 2020/21 Federal Budget that we see as relevant to our work at Jade Caravan Finance.
Budget Overview and Background
The annual Federal Budget is usually announced, or brought down, in May with the intention that policies, programs and measures can be legislated and in place by the start of the new financial year on 1 July. Due to the disruption to both the economy and many other aspects of life caused by COVID-19, it was decided early in the year to delay the budget until October. The timing was considered as being able to give the Treasurer a better opportunity to frame a budget to suit the specific requirements of the economy when the wider effects of the pandemic could be assessed.
Federal Treasurer Josh Frydenberg announced the budget in Parliament on 6 October, with a clearly communicated strategy of jobs creation and a post-COVID and recession-addressing recovery driven by businesses.
The budget covers a wide range of measures covering many sectors, individuals, community groups and industries, many of the measures were released in pre-budget announcements. The key issues relevant to caravan finance we have identified as the personal income tax changes and cuts and the changes to the consumer credit laws.
Personal Tax Measures
Personal income tax changes were first introduced in the 2018 Federal Budget, where a 3 stage process was announced to be introduced over several years up to 2024. Stage 1 which includes the low income offset and low to middle income offset have already been passed and implemented.
Stage 2 was not due to be implemented until 2022 but as an initiative to get money to consumers when it is most needed, Stage 2 was brought forward in the Budget. It is now to be introduced 2 years early from 1 July 2020. The announcement was made on 6 October which means the changes will need to be back-dated.
Changes announced include:-
- The low income offset is to be increased from the current level of $445 to $700. This is refunded to eligible taxpayers when they submit they income tax return at the end of the financial year.
- The low and middle income offset which varies according to income level, can mean a $1080 refund to some tax payers. This was implemented previously and will now continue for the 2020/21 tax year. As an offset, this is also applied to an individual’s tax return when submitted for assessment at the end of financial year – after 30 June 2021.
While these offsets won’t be received by taxpayers until after 30 June 2021, other changes announced will put cash into the hands of individuals as soon as November 2020. Those changes involve adjustments to the tax bracket thresholds.
- Currently the 19% tax bracket has a threshold of $37,000. That will increase to $45,000, meaning those earning $37,000-$45,000 will move into a lower tax bracket and pay less tax.
- The same process applies to the 32.5% tax bracket. Currently the threshold is $90,000 and that will increase to $120,000.
Implementation of the Changes
The first step is to announce a budget measure, the next step is for Government to get their Budget Bill passed in both Houses, legislated and rolled out. The Opposition quickly responded post-Budget announcement, that they would pass the changes through the Parliament so people could start receiving their benefits.
So Treasury could promptly started the process to implement the new tax rates. The process involves the ATO preparing and issuing new tax schedules and businesses and payroll processing companies updating their software and systems to cater for the changes.
It is expected this process will be finalised by late October – early November.
So that brings us to the back-dating issue. The new, lower, tax rates will apply to 3+ months of wages which have already been paid and PAYG withheld at the higher rate. The refund due to individual tax payers will be calculated and refunded at the end of the financial year when they submit their income tax return.
Impact for Caravan Finance
The effect of the income tax cuts will provide additional cash to individuals in their weekly/monthly wages. This may make it more attractive for individuals to seek a loan to purchase their own caravan or pay down an existing caravan loan. Secured Caravan Loans as arranged through Jade Caravan Finance do permit for additional payments to be made to finalise a loan early.
Another key budget issue is the changes to the consumer credit laws which are planned to come into effect in April 2021. We have covered this in detail in another article and will keep track of the progress of the legislation through Parliament.
To discuss your options for caravan finance, speak with a Jade Caravan Finance consultant at 1300 000 003
DISCLAIMER: THE DETAILS, INFORMATION, DATA AND MATERIAL PRESENTED IN THIS ARTICLE HAS BEEN SOURCED, IN FOOD FAITH, FROM REPUTABLE SOURCES IN THE PUBLIC DOMAIN. INFORMATION IN RESPECT OF GOVERNMENT ANNOUNCEMENTS, POLICIES, PROGRAMS, MANUFACTURER’S GOODS AND SERVICES AND OTHER SUBJECT MATTER IS OFFERED FOR GENERAL INFORMATIVE PURPOSES ONLY AND NOT IN ANY WAY INTENDED AS A SOLE SOURCE FOR THE PURPOSE OF MAKING FINANCIAL DECISIONS. NO LIABILITY IS ACCEPTABLE FOR ANY ERRORS OR MIS-INTERPRETATION OF FACTS AND MATERIAL. IF A PERSON CONSIDERS THEY REQUIRE FINANCIAL ADVICE IN REGARD TO THEIR SPECIFIC AND INDIVIDUAL CIRCUMSTANCES, THEY SHOULD SEEK INDEPENDENT ADVICE FROM A FINANCIAL ADVISOR.