Designed to cushion the impact of COVID-19 and kickstart the economic recovery, this year’s Federal Budget has been described by the Prime Minister as “arguably one of the most important, if not the most important since the end of the Second World War”. This Budget is designed to rescue the Australian economy from it’s worst downturn since the Great Depression.
In stark contrast to the modest surplus forecast in the 2019-20 budget, the 2020-21 budget forecasts a deficit of $213.7billion with deficits also expected through until 2023-24.
The Budget delivers substantial tax relief, including personal tax relief of $12.5billion over the next 12 months for more than 11 million taxpayers. This will be achieved by bringing forward Stage 2 of the already legislated personal income tax plan from 2022-23 to 2020-21, backdated to 1 July 2020, as follows:
The Low and Middle Income Tax Offset was due to be removed when Stage 2 commenced, but this has been retained for the 2020-21 year.
Pensioners and other eligible recipients will also receive two $250 payments from December and March.
Business Support and Incentives
The tax relief for businesses is even greater, delivering an estimated $31.6billion. The Budget includes both temporary full expensing and temporary loss carry-back measures for businesses with turnover of up to $5million.
The instant asset write-off has been extended until June 2022.
Losses incurred by companies to June 2022 can be offset against prior profits made in or after the 2018/19 financial year.
Incentives for Hiring
Unemployment is expected to rise to 7.25% in the June quarter of 2020-21 before falling in future years.
The Budget includes $1.2billion to support Australian businesses to employ 100,000 new apprentices or trainees (by providing a 50% wage subsidy) and a $4billion JobMaker Hiring Credit program (commencing 7 October 2020) which provides employers $200 per week payable for one year for hiring additional employees aged between 16 and 35 who are currently on JobSeeker, Youth Allowance or Parenting Payment. For those aged 30 to 35, the JobMaker payment is $100 per week.
The Government will also increase it’s infrastructure pipeline by $10billion to $110billion over the next 10 years.
Manufacturing and Research and Development (R&D)
The budget includes a $1.3billion Modern Manufacturing plan to target 6 key industries, from food and beverage manufacturing to renewable energy and the space industry.
There is also increased funding for R&D including $2bilion in new incentives, $1billion for new research funding for universities and more money for the CSIRO. The Budget removes the cap on R&D refunds and lifts the rate.
Much of regional Australia is still suffering from the impact of drought and bushfires.
The budget includes $2billion on concessional loans for farmers and $2billion for water infrastructure projects across the country.
$350billion has also been allocated to support regional tourism, while $317million is earmarked for exporters to continue to access global supply chains.
Women in STEM and Female Entrepreneurs
The budget includes $240million in programs and support, with the focus on new cadetships and apprenticeships for women in science, technology, engineering and mathematics, job creation and entrepreneurialism.
As Treasurer Josh Frydenberg said, “The road to recovery will be hard but there is hope”. The 2020-21 Budget is a road to recovery paved with cash stimulus measures, suggesting that the Government is applying the old adage “You have to spend money to make money” to try to trade our way out of a black hole. There are many initiatives in this budget, in fact, too many to mention in this brief summary. Whichever way you look at it, it will be a long road to recovery from the ravages of the COVID-19 pandemic.
This fact sheet is of a general nature and is intended as a guide only.
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