On Tuesday, 6 October 2020, Treasurer Josh Frydenberg handed down the Federal Budget which was largely defined by the COVID-19 pandemic.
At a glance
A wide range of sectors and stakeholders are affected by the Budget. At a high level, the winners and losers of this Budget have been reported as follows:
Australia’s economy has taken one of its largest blows as a result of the pandemic. Since the July economic update, Australia’s debt and deficit have increased with the country headed toward a record debt of $1 trillion by June 2024. Our current net debt is $703 billion.
Income tax cuts
The Treasurer announced Stage 2 of the Government’s tax cuts will provide relief for more than 11 million Australians. The tax cuts will be brought forward and can be backdated to July 2020, affecting each income threshold differently.
An additional $17.8 billion in personal income tax relief is being delivered to aid economic recovery with a further $12.5 billion over the next year. This will add to the $8.1 billion in tax relief for the 2020 – 2021 income year under the Personal Income Tax Plan.
Construction and infrastructure
The Government has offered a stimulus package to the construction industry which includes job creation and increased cash flows.
The HomeBuilder Scheme has allocated $688 million for cash grants for Australians wishing to build or renovate their homes. In short, HomeBuilder is a time limited grant of $25,000 for eligible owner occupiers (inclusive of first home buyers) to construct or renovate their homes. A construction contract is to be executed between 4 June 2020 and 31 December 2020 and construction must commence within three months of the contract date.
With respect to infrastructure, the Government has invested $14 billion into new/fast-tracked projects. $7.5 billion is to be spent on transport, road and rail projects, $2 billion on road safety upgrades and $1 billion for councils to improve local roads, footpaths and street lighting. What is more, the ten-year infrastructure pipeline is expected to support approximately 40,000 jobs.
The Government is seeking to support new investment and improve business cash flow by way of temporary tax incentives available to 3.5 million businesses. This will benefit 99% of businesses which employ 11.5 million Australian workers. This incentive is applicable to $200 billion worth of investment which includes 80% of investment in depreciable assets by non-mining businesses.
Effective from 6 October 2020 (7:30pm AEDT) until 30 June 2022, businesses with a turnover up to $5 billion will now be able to write off the full value of any eligible asset purchased for the business. Costs of improvements to existing eligible depreciable assets made during this period are also fully deductible.
Furthermore, companies with a turnover up to $5 billion may offset losses against previous profits where tax has been paid, for a refund. Loss carry-back will be available to approximately 1 million companies employing 8.8 million Australian workers. Importantly, losses up to 2021 – 2022 can be carried back against profits made during or after 2018 – 2019. Companies eligible for the scheme may choose to receive a tax refund upon lodging 2020 – 2021 and 2021 – 2022 tax returns.
Separate to tax incentives, the Government is also seeking to streamline the way in which Australians do business as part of the Economic Recovery Plan. Australian businesses are encouraged to invest, act on opportunity, create jobs and effectively respond to our ever-changing modern world. As part of the Budget, the Government will seek to digitise an array of regulatory processes, reduce regulations that create unnecessary costs or impede business activity and support small business during recovery.
COVID-19 has reiterated our reliance on and the importance of supply chains. The Budget shows the Government allocated $1.5 billion towards the Modern Manufacturing Strategy to bolster our manufacturing sector and ensure our supply lines are secure.
Focus areas for the Strategy include food and beverage, resource technology and recycling, clean energy, medicine and medical products, space and defence.
The purpose of this initiative is to create jobs, aid the recovery process and ensure Australia is well equipped in the face of another pandemic or disaster.
Energy and the environment
The Government has allocated $1.9 billion to address impacts of climate change through low-emission energy sources and renewable technologies. Meanwhile, $1.8 billion will go to our environment including $249.6 million to modernise Australia’s recycling infrastructure, reducing waste and promoting recycling.
The Budget also included the new JobMaker Program set to benefit young Australians. The JobMaker Hiring Credit will aid employment levels in the recovery process whereby businesses are incentivised to employ young job seekers between the ages of 16 to 35.
The Credit offers payment of $200 per week for workers aged between 16 and 30 and $100 per week for workers aged between 30 to 35. To be eligible, new employees must have been on JobSeeker and given at a minimum 20 hours of work per week. Importantly, all businesses are eligible excluding major banks.
The Program is set to support approximately 450,000 positions at a cost of $4 billion from 2020 – 2021 to 2022 – 2023. The JobMaker Hiring Credit is announced on top of the $1 billion JobTrainer program seeking to provide lower cost training places for school leavers and wage subsidies for 100,000 apprenticeships and traineeships.
Need advice? Madison Marcus can help.
For advice on eligibility for grants or clarification regarding any of the above-mentioned areas, we encourage you to reach out to our Madison Marcus industry experts to learn more about what the budget means for your business.