The 2021 Federal Budget brings great news to over 10 million Australians. Here’s what’s happening and how employers can continue to support their employees as our economy recovers.
With an extension of the Low and Middle Income Tax Offset (LMITO), otherwise known as “The Lamington”, low and middle income earners will receive offsets worth up to $1,080 for singles or $2,160 for couples. This amount is payable after lodging tax returns.
Part-time workers will also benefit from the budget as Treasurer Josh Frydenberg tosses out the $450 a month threshold where some part-time workers earning less than $450 a month would not receive superannuation from their employers on those wages.
Removing this threshold will benefit approximately 300,000 part-time workers who are mostly women that have no choice but to work part-time in order to support their children and families.
Families will also benefit from the 2021 Federal Budget.
Families with two or more children will be delighted to hear that the government will increase subsidies for childcare fees to a maximum of 95%. This will also apply to high income earning parents as the subsidy cap is removed.
These decisions have been made to help Aussies recover from the pandemic. While the benefits seem nice, they are mostly short term and will have long term impacts that we should not overlook.
What’s the catch?
While these cuts will bring short term benefits to Australians, it will also mean that national debt will remain high. Down the track, taxpayers will lose when interest rates rise. As Australian’s slowly recover from the effects of the pandemic, employers should think of ways to support their employees in the long run.
How can employers support their employees?
Thinking about the LMITO extension and childcare subsidy
Low and middle income earners will benefit now, but when LMITO eventually ends, they will go back to paying the original amount of tax before LMITO was introduced.
Although the childcare subsidies will support families in the long run, it will also contribute to the national debt, meaning, taxpayers will be slightly worse off.
Our Accounts Officer, Pram Perera, has highlighted some ways employers can help their employees make the most of their salaries. Employers can:
Help their employees choose a superannuation fund that will best suit their needs
Advise employees on ways to increase their super such as government co-contributions
Provide employee discount programs
Provide payroll advances and advise employees on what this means
Support employees in setting up infrastructure for retirement or pension plans
Set up flexible spending accounts or health savings accounts if their employees are eligible
Set up budgeting seminars for their employees
It may seem obvious to employers that these actions and benefits exist. However, you’d be surprised by the number of people who have no idea they could make the most of their salaries in these ways. The best part is that most of these can be done at no extra cost to employers.
What about the removal of the threshold?
Eliminating the threshold is great for part-time workers but it also means that employers will need to pay superannuation for all of their staff. This should not mean that employers should start cutting costs, such as by cutting staff or reducing hours, to pay for compulsory super contributions. Doing so could be detrimental to the business in the long run as workers potentially have to work harder and get burnt out.
Businesses should also avoid being swayed by numbers. One study showed that during the Great Recession in the U.S., a large technology company reported that their productivity levels rose even though they had reduced their number of staff. The study found that productivity rose due to employees being required to work harder, rather than because they sacked “bad” workers and kept high performers.
For more talent management advice, visit our blog here. Or, if you’re looking for talent management solutions for your business, fill in the form below and we’ll be in touch shortly.