Big Spending Budget To Help Australia Recover

Touted as the most significant Federal Budget in decades, the Federal Government’s 2020 budget sets the scene for a slow climb back to surplus, after the first recession in almost 30 years

The federal budget is focussed on repairing the economic devastation caused by COVID-19. A key element of the Government’s Economic Recovery Plan is the $74 billion JobMaker Plan. Designed to support stronger economic recovery and bring more Australians back to work.

The underlying forecast deficit is $214 billion for 2020-21. This is an astounding $220 billion worse than forecasts prior to COVID. The increase in spending is four times bigger, relative to national income than during the global financial crisis (GFC).\

TAXES

The Budget brings forward previously legislated income tax cuts for lower and middle income earners. These changes will be backdated to July 2020. Lower and middle income earners will receive tax relief up to $2,745 for singles and up to $5,490 for dual income families. The government will also keep the Low and Middle Income Tax Offset for an extra year, to provide further relief. The majority of benefits in the 2020-21 financial year will go to those on incomes below $120,000.

The Medicare Levy will remain unchanged at 2 percent of taxable income.

BUSINESS SUPPORT

The extension of the instant asset write off to businesses with a turnover of up to $5 billion will be extended until June 2022.

Companies with turnover of up to $5 billion will be able to temporarily – up to 30 June 2022, offset tax losses against previous profits and tax paid in or after 2018-19.  This will provide much-needed cash to previously profitable businesses that are now making losses due to COVID-19.

The introduction of Modern Manufacturing Strategy totalling $1.5 billion will be set up to support a more competitive, productive, and strong manufacturing sector.

Acceleration of reforms and investment to enable greater adoption of digital technologies was also announced. This includes initiatives to pilot blockchain technologies to reduce the cost of compliance and support for fintech exports and $24.7 million to help small business operators use technology to improve their processes.

There is a commitment to make it easier for businesses to invest, create jobs, respond quickly to challenges and seize opportunities without having to navigate unnecessary red tape.

Reforms will be kept in place to allow companies to hold virtual AGMs and execute documents electronically. Opportunities will be made available to female entrepreneurs to access expert mentoring and business advice, supporting 282 start-ups and 4,300 mentoring engagements for female entrepreneurs.

EDUCATION & APPRENTICESHIPS

The economic impact of COVID, is expected to encourage more people into tertiary study.

Wage subsidies, costing $1.2 billion, will be available for 100,000 new apprenticeships. A one-off injection of $1 billion will be made available to support research at universities to help offset the negative impacts of international student returning home during COVID and hence lost revenues. An extra 12,000 Commonwealth Supported university places will be provided for priority areas in 2021.

Short courses will also benefit from an additional 50,000 subsidised higher education places in 2021. Funds of $146 million over five years was allocated to improving educational outcomes and social cohesion for young Australians.

SUPERANNUATION

To avoid the creation of multiple superannuation accounts, superannuation accounts will be ‘stapled’ to members.

From 1 July 2021, will see the introduction of an online YourSuper compassion tool, which will allow people to compare superannuation products more readily.

The Government will legislate additional requirements to ensure Trustees act in the best financial interests of members. One such measure will include providing members, in advance of Annual Members’ Meetings, with key information regarding how Trustees manage and spend money.

There are no changes to superannuation guarantee rates.

AGED CARE

Funding for this sector is up $2.2 billion, including $1.6 billion for 23,000 additional home care packages. $408.5 million was allocated to improve the care and quality of the aged care system.

INFRASTRUCTURE & REGIONAL AUSTRALIA

After experiencing the effects of natural disasters including the devastating bushfires, regional Australia will be a major beneficiary of government infrastructure spending. The Budget includes an additional $14 billion for new and accelerated infrastructure projects throughout Australia over the next four years.

Infrastructure spending includes: $10 billion Bruce Highway upgrades; $800 million Gateway Motorway – Bracken Ridge to Pine River; $750 million Coomera Connector, Stage 1; an additional $4.5 billion for NBN ultra-fast broadband services; $250 million to accelerate electricity transmission links; $3 billion for small scale road safety upgrades; $2 billion for new National Water Infrastructure; $250 million for the modernisation of infrastructure to reduce waste and increase recycling.

THE ENVIRONMENT

The environment will see improved funding for the Australian Renewable Energy Agency (ARENA) and Clean Energy Corporation to assist with the development of new technologies to lower emissions.

HEALTH

The budget delivers unexpected levels of new funding for mental health and aged care. Mental health saw a commitment of $5.7 billion to double support from 10 to 20 Medicare-funded psychological sessions as well as more funding for helplines. NDIS will receive $3.9 billion in additional funding for 400,000 Australians with a disability.

The Government allocated a potential $1.7 billion to pre-order 84.8 million doses of a COVID vaccine.

For further information about the Federal Budget please visit the Federal Budget.

If you have any queries in relation to this matter, please do not hesitate to contact our office.