Billions of dollars will be spent on aged care, infrastructure, the NDIS and employment incentives as well as tax initiatives such as the further extension of the low-and-middle-income tax offset worth $1,080 to those earning from $48,000 to $90,000.
Key measures for business include extending temporary full expensing and temporary loss carry-back for an additional year to help small to medium enterprises (SMEs) recover from a tough 2020.
Companies with domestic turnovers capped at $5 billion will be able to write off COVID-19-induced losses against previous profits, which will also be extended to include the 2022-23 income year.
Other measures for SMEs announced as part of yesterday’s budget include:
- Reconfirming the reduced the tax rate for small and medium companies, to 25 per cent from 1 July 2021
- $129.8 million to encourage entrepreneurship through the New Enterprise Incentive Scheme (NEIS) and Entrepreneurship Facilitators Program
- $1.2 billion investment in the digital economy
- A $506 million extension of the federal government’s JobTrainer program
- A further one-year extension to the instant tax write-off scheme, businesses with a turnover of less than $5 billion immediately write-off the cost of assets they first use by June 30, 2023
- Tax will no longer be payable on employee share schemes when an employee leaves the business.
Specific sectors to benefit from the budget include a 30 per cent refundable tax offset policy for video game development from July 2022.
From July 1 this year, about 1000 small brewers and distillers will receive full excise refunds with a cap of $350,000.
The refund is up from 60 per cent, to 100 per cent, and more than triples the cap to $350,000, up from $100,000, in line with the Wine Equalisation Tax (WET) Producer Rebate.
The Australian Small Business and Family Enterprise Ombudsman Bruce Billson said the budget was a clear acknowledgement that small and family businesses were central to the nation’s economic recovery and future prosperity.
“These measures will support small and family businesses as they help lead our national economic recovery and play a critical role in securing our future prosperity,” he said.
A $3.2 billion infrastructure spend on South Australia was also announced in the budget but only $130 million of that – about 4 per cent – is allocated for the 2021-22 financial year.
Business SA CEO Martin Haese said after last night’s budget announcements that South Australia was heading in a positive direction.
“Further assistance for business announced tonight, particularly an extension of the Boosting Apprenticeship Commencements scheme until March 2022 and temporary full expensing of assets until June 2023, will definitely help to cement the current recovery,” he said.
“In the medium to long term, key infrastructure projects including part of the Augusta Highway duplication are also going to set South Australia’s regions up for sustained economic growth.”
William Buck Adelaide Tax Director Andrew Nicola said proactive and forward-looking business owners and operators stood to make the most of the opportunities on offer in the budget.
“By investing in capital assets, considering specific loss carry-back rules and utilising employment incentives as part of tailored and strategic tax/business planning analysis, businesses across the state may secure significant cashflow benefits through Federal Budget initiatives.
“There’s also increased incentive for employers to take on apprentices, which is encouraging as this can reduce the financial pressure of taking on new apprentices during this economic recovery phase.”
The homebuilder grant program has sparked $30 billion worth of residential construction in the past 11 months. The budget includes provisions to extend the required start date for projects from six months to 18 months.
An additional 10,000 places in the New Home Guarantee scheme for 2021-22, which helps first homeowners build or buy a new home with a reduced deposit, were also included in last night’s budget.
Credit Union SA CEO Todd Roberts said the measures were likely to help more South Australians realise homeownership.
“The home deposit measures and superannuation initiatives, combined with the homebuilder timeline extensions, come at an important time for our local housing market considering the heightened competition for property from local and interstate buyers,” he said.
Federally, economists had expected a much-improved budget bottom line in response to the strong economic rebound from last year’s recession, a rapidly declining unemployment rate and a spike in the iron ore price.
Instead, deficit reductions were relatively modest as Frydenberg went on another spending spree in a budget he describes as securing Australia’s economic recovery.
Deloitte Access Economics economist Chris Richardson estimates the recovery gave the budget around $100 billion more than forecast, but the government has decided to spend some $96 billion of that in tax cuts and increased spending.
“They have taken what the economy has given them and have spent almost all of that,” he said.
Tax Partner at BDO in Australia Mark Molesworth said the government had focused on providing “relief on tax as they roll out the vax”.
“The economy is unexpectedly in better shape with stronger employment figures, consumer confidence and commodity prices combining to put us in a good position, especially in comparison to other countries,” he said.
“However, the story of the night is the new spending. The government has clearly decided to go hard in priming the economy and prioritising spending in what it sees as key areas such as aged care, family and domestic violence prevention and child care.”
But PwC Australia chief economist Jeremy Thorpe warned that fundamental reform could not be put off forever.
“This is not a stimulus budget,” he said.
“This is a renovation budget.”
President of the Australian Council of Trade Unions Michele O’Neill said the budget failed to deliver on two key issues that mattered to working Australians: insecure jobs and years of flat wages.
Chief executive of the Australian Industry Group Innes Willox said the longer-term projections showed the Morrison government did not expect much productivity growth.
“We need, for this budget to succeed, a credible plan to get our borders open,” he said.
“We’re in a little bit of a gilded cage at the moment here and the quicker we can get out of that and be interacting with the global community, the better.”
Property Council of Australia chief executive Ken Morrison agreed that closed borders and not pursuing a population growth agenda had consequences for growth.
“We should begin to upscale our quarantine and border processing facilities immediately,” he said.
“We can bring more people through the border in a COVID-safe way. We can provide the skills, we can bring the students in.”
Yesterday’s budget predicts a deficit of $161 billion for 2020/21, compared to the $197.7 billion deficit forecast in December’s update.
For 2021/22, the deficit is seen at $106.6 billion, only a shade smaller than the $108.5 billion previously forecast.
The deficit is on track to still be $57 billion in 2024/25.
Commonwealth net debt is forecast to rise to $617.5 billion in 2021/22 before hitting $980.6 billion in 2024/25.
– with AAP
Local News Matters
Media diversity is under threat in Australia – nowhere more so than in South Australia. The state needs more than one voice to guide it forward and you can help with a donation of any size to InDaily. Your contribution goes directly to helping our journalists uncover the facts. Please click below to help InDaily continue to uncover the facts.