- The 2020 Budget was delayed from May due to the coronavirus pandemic.
- It’s a Budget focused on boosting private sector employment and investment.
- The second stage of legislated tax cuts has been brought forward to 1 July 2020 to stimulate consumer spending.
By Jo McKinnon
As expected, tax cuts and incentives for businesses to invest and hire new staff were the topline attractions in Australia’s delayed 2020 Federal Budget, delivered by Treasurer Josh Frydenberg on 6 October in Canberra.
“The Great Depression and two World Wars did not bring Australia to its knees, neither will COVID-19,” declared Treasurer Josh Frydenberg.
In Frydenberg’s plan, the economy is forecast to grow by 4.25% next calendar year and unemployment is expected to fall to 6.5% by the June quarter 2022.
The cost is a Budget deficit of A$213.7 billion this year, falling to A$66.9 billion by 2023-24. Net debt is predicted to peak at A$966 billion (44% of GDP) in June 2024.
A Budget that’s all about jobs
The treasurer announced that “This Budget is all about jobs,” and last night JobMaker and JobTrainer joined JobSeeker and JobKeeper in the Australian lexicon.
JobMaker and JobTrainer are programs that focus at getting young people into work or connected with work. There is money for an additional 100,000 new apprenticeships and traineeships and a weekly A$200 credit to employers who take on young people who have been on JobSeeker.
Infrastructure projects will be brought forward, with an extra A$14 billion in the Budget to support a further 40,000 jobs, with road and rail projects in regional areas already announced.
In addition, there is A$2 billion for road safety upgrades and A$1 billion to local councils to immediately upgrade local roads, footpaths and street lighting.
What the 2020 Budget delivers for business
Personal tax cuts: Legislated tax cuts have been brought forward to 1 July 2020, lifting the 19% tax threshold from A$37,000 to A$45,000, and the 32.5% threshold from $90,000 to $120,000. The Low and Middle Income Tax Offset is retained for an additional year.
Full expensing: Businesses with turnover up to A$5 billion can deduct the full cost of eligible depreciable assets of any value in the year they are installed between 6 October 2020 and 30 June 2022. The current instant asset write off has been extended to 30 June 2021.
Tax loss carryback: Companies with turnover up to A$5 billion can temporarily offset losses against previous profits on which tax has been paid to generate a refundable tax offset.
JobMaker Hiring Credit: Employers who hire those on JobSeeker in new jobs for a minimum 20 hours a week can claim a 12-month credit of $200 a week for new additional staff aged 16-29, and A$100 a week for staff aged 30-35.
JobTrainer Fund: A$1.2 billion to create 100,000 new apprenticeships and traineeships, with a 50% wage subsidy (up to A$7000 quarter) for 12 months for businesses that employ them.
R&D: An additional A$2 billion available through the Research and Development Tax Incentive, removing the cap on refunds and increasing the refundable tax offset rate.
What about small business?
“From the perspective of small business, the government has hit the nail on the head with this approach,” says Sam Allert, CEO of cloud accounting software firm Reckon, which surveyed 1002 Australian small businesses across the country in late September 2020 to discover their top ‘wish list’ items for Budget 2020.
“From the perspective of small business, the government has hit the nail on the head with this approach.”
“Job creation and low unemployment are the number one priority for small businesses with this Budget, so it’s safe to say that small businesses strongly welcome the government’s JobMaker agenda aimed at supporting the creation and protection of jobs.”
Bringing forward the tax cuts will also be popular. “Lowering personal income tax rates to stimulate consumer spending is one of the top three things small businesses want from Budget 2020,” says Allert.
“In fact, small businesses would much rather see personal income tax rates lowered (68% in the Reckon survey), than to see a reduction in company tax rates (35% in the Reckon survey).”
Picture: Sam Allert.
What was missing from Budget 2020
So what was missing? The tourism, retail and entertainment industries – sectors hit hardest by COVID-19 lockdowns – appear to have missed out on targeted federal support in this Budget.
Unlike in other nations, where government-supplied vouchers have encouraged people to dine out or take a holiday, Australia’s small businesses will have to rely on workers spending their $21 a week tax cut to revive their fortunes.
Nor were any measures announced to reduce childcare costs, something many economists have flagged as a barrier to women working more hours and increasing the nation’s productivity.
CA ANZ Budget 2020 analysis
Read more analysis on last night’s Budget by CA ANZ experts including Michael Croker and Tony Negline CA.Read more on Budget 2020