- Once in a generation Budget: The Federal Treasurer tonight handed down a once in a generation Budget with parallels not seen since The Second World War. This includes record deficits of $213.7 billion for 2020-21 and $480.5 billion over the forward estimates. The 2020-21 Budget commits further response and recovery assistance, bringing the Government’s overall support to $507 billion.
- Continued fiscal support: The Budget responds to Business NSW’s call for fiscal support until the unemployment rate is returned to below 6 per cent. There remains considerable spare capacity in the economy and support measures announced tonight have been configured to boost jobs and ensure our economy runs closer to its potential. Absent of this support, Treasury estimates the economy would be 4½ per cent worse off by 2021-22 with the unemployment rate rising and remaining 5 percentage points higher throughout 2020-21 and 2021-22.
- Business at the heart of recovery: Business takes its place at the heart of our economic recovery with a range of measures to support investment and the creation of jobs. This includes wage rebates, investment incentives, new skills initiatives, direct support for employers, business tax cuts and strategies to boost our manufacturing sector. Businesses will also benefit indirectly from personal income tax cuts, infrastructure spending and broader fiscal support aimed at boosting public demand.
- Tax cuts take centre stage: Temporary full expensing will offer a major boost to businesses looking to purchase new capital equipment with the $26.7 billion commitment expanding on the popular instant asset write-off. Businesses will indirectly benefit from personal income tax cuts which will be brought forward to deliver $17.8 billion in additional tax relief for households. These tax cuts will be backdated and will boost disposable incomes by $1,080 for incomes above $45,000 and $2,565 for incomes above $120,000.
- Budget to get Australia Back on track: Business NSW is pleased the Budget responds to many of the challenges raised in our pre-Budget submission and our COVID-19 recovery plan Back on track. While the Budget sets out the next phase of recovery, the business community will be looking for progress on much needed structural reforms, including in areas such as tax and workplace relations.
- Crash and recovery: COVID-19 has resulted in the most severe global economic crisis since the Great Depression. GDP is expected to fall by 3¾ per cent in 2020. While the outbreak and re-introduced restrictions in Victoria set back Australia’s recovery, further easing of containment measures, improving business and consumer confidence and Government support are expected to see real GDP grow by 4¼ per cent in 2021.
- Unemployment rate yet to peak: The unemployment rate is forecast to reach 8 per cent in the December quarter 2020, reflecting headwinds from ongoing international and domestic border closures, the continuation of social restrictions in Victoria, ongoing restructuring among businesses and the impact of increased participation. The unemployment rate is expected to fall to 6½ per cent by the June quarter 2022 as economic activity recovers.
- Debt and deficit: The underlying cash balance is now expected to reach a deficit of $213.7 billion (11 per cent of GDP) in 2020-21 before improving to $66.9 billion (3 per cent of GDP) in 2023-24. Net debt is expected to be 36.1 per cent of GDP at 30 June 2021 and peak at 43.8 per cent of GDP at 30 June 2024. Net debt is then projected to fall over the medium term to 39.6 per cent of GDP at 30 June 2031.
- Radical uncertainty: The precise trajectory and pace of our recovery remains highly uncertain. The global and domestic outlook is ambiguous while the timing and efficacy of vaccines and other medical treatments is uncertain.
HIGHLIGHTS FOR BUSINESS
- Investment boost for business: Effective immediately (until 30 June 2022), businesses with turnover up to $5 billion will be able to deduct the full cost of eligible depreciable assets of any value in the year they are installed. This is a major incentive for businesses to bring forward investments and represents a $26.7 billion commitment over the forward estimates. Business NSW called on the Government to commit to expanding investment allowances as part of our pre-Budget submission.
- JobMaker hiring credit: In line with Business NSW’s proposal for a Youth Jobs Guarantee, the Budget announces support for young people looking for work. From tomorrow, businesses that take on a jobseeker aged under 35 years will receive a payment of $200 a week for an eligible young person aged 16-29 years and $100 a week for a young person aged 30 to 35 for up to 12 months. Employers must demonstrate they have increased their overall employment. This will help employers get young people back into work, ensuring we don’t lose a generation of workers to this crisis. It is estimated the $4 billion scheme will support around 450,000 young Australians into jobs.
- Apprentice and trainee subsidy: The Government has responded to Business NSW’s calls for a skills package for younger workers, including a $1.2 billion package for employers taking on new apprentices or trainees. The subsidy extends support for existing apprentices and trainees. The 50 per cent wage subsidy will support 100,000 new positions, a vital step towards maintaining a pipeline of skilled workers at a financially difficult time for business.
- Temporary loss carry-back: The Government will also allow companies with turnover up to $5 billion to offset losses against previous profits on which tax has been paid to generate a refund. Loss carry-back will be available to around 1 million companies that employ up to 8.8 million workers. This measure is expected to deliver $4.9 billion in tax relief to businesses over the forward estimates.
- Business tax concessions: An additional $2 billion will be invested through the R&D Tax Incentive, including increasing the refundable R&D tax offset and removing the cap on annual cash refunds for small claimants. Larger claimants will be subjected to a streamlined intensity test with the cap lifted from $100 million to $150 million a year. Businesses will also receive FBT tax concessions if they pay to retrain or reskill workers. Businesses with an annual turnover of between $10 million and $50 million will gain access to up to ten small business tax concessions. This will include being able to immediately deduce certain start-up expenses, as well as FBT exemptions for car parking and eligible work-related electronic devices.
- Support for construction sector: With a sharp slump in population growth, the Budget announces several new initiatives to boost construction. This includes additional incentives for first homebuyers to purchase new dwellings, boosting arrangements to encourage institutional investment into affordable housing and a capital gains tax exemption for granny flats (where there is a formal arrangement for older Australians or persons with a disability). These initiatives complement the existing HomeBuilder scheme ($25,000 grants for eligible renovations or new builds) which applies to eligible contracts entered into up to 31 December 2020.
- Manufacturing-led recovery: The Government will invest $1.5 billion to boost Australian manufacturing in areas where Australia already enjoys an advantage. The Modern Manufacturing Initiative will support Australian businesses to scale-up in priority areas including resources technology, food and beverage, medical products, recycling and clean energy, defence and space. Roadmaps to guide investments in these priority sectors will be co-designed with industry. Manufacturing will also be boosted by recent announcements relating to gas supply, responding to recommendations made in our Running on empty report.
- Regional tourism recovery: The Government will invest over $250 million for a Regional Tourism Recovery Package. Regional communities will benefit from $200 million in grants through the Building Better Regions Fund with $100 million of the fund earmarked for tourism-related infrastructure projects that will boost regional tourism.
NSW IN FOCUS
- GST hit: GST receipts distributed to NSW will be lower than expected over the next several years. Compared to forecasts at December 2019, GST receipts have been revised down by a total of $21.2 billion over the forward estimates including $7.8 billion in 2020-21. This will impact the firepower of state budgets which are reliant on GST as a major revenue source.
- Additional infrastructure commitments: The Budget confirms an additional $2.7 billion in infrastructure commitments for NSW, including $603 million for the New England Highway Singleton Bypass and Bolivia Hill Upgrade and an additional $491 million for the Coffs Harbour Bypass.
- Use it or lose it infrastructure payments: The Government will make $3 billion available to use towards shovel-ready projects. This includes $2 billion for small scale road safety payments and $1 billion for local roads. Funding will be provided to state and local governments on a “use it or lose it” basis to ensure funding is pushed out the door.
And here are some other announcements from tonight’s budget you may have missed.
Temporary changes to parental leave access: Thousands of new mothers are expected to qualify for paid parental leave after changes to eligibility requirements in response to the COVID-19 pandemic. The temporary changes have been unveiled in the federal budget and are expected to help 9000 mothers, as well as 3500 fathers and partners.
Superannuation accounts to follow workers: New super accounts won’t be automatically created for Australian workers when they change jobs under federal government changes.
Business tax breaks to boost investment: More than 99 per cent of businesses will be able to write off the full value of eligible assets in a multi-billion dollar “game-changer” to kickstart private sector investment, Treasurer Josh Frydenberg says.
Extra 23,000 home care places for elderly: Another 23,000 home care packages will be available for older Australians who want to keep living at home as part of $2 billion in federal government spending.
Head to https://budget.gov.au/2020-21/content/overview.htm for the entire Budget 2020-21 breakdown