Budget 2020-21: What’s in it for businesses?

This year, Australia will see a $213.7 billion deficit.

“Our economic response has come at a significant cost,” said Treasurer Frydenberg in his address on Tuesday evening.

The deficit is expected to fall to $66.9 billion by 2023-24.

Net debt will increase to $703 billion (36 per cent of GDP this year) and peak at $966 billion (44 per cent of GDP in June 2024).

JobMaker Plan

JobMaker hiring credits

In this evening’s Federal Budget announcement, Treasurer Josh Frydenberg has announced a new JobMaker hiring credit to encourage businesses to hire younger Australians.

The JobMaker hiring credit will be payable for up to twelve months and immediately available to employers who hire those on JobSeeker aged 16-35.

It will be paid at the rate of $200 per week for those aged under 30, and $100 per week for those aged between 30-35.

“Having a job means more than earning an income,” said the Treasurer. “It means economic security. It means independence. It means opportunity.”

“We can’t let this COVID recession take that away.”

Supporting small business and responsible lending

The Government will implement reforms to support consumers and businesses affected by COVID-19 to facilitate Australia’s economic recovery.

The reforms will reduce regulatory burden to ensure a timely flow of credit and resolution for distressed business.

These include:

  • Introducing a new process to enable eligible incorporated small businesses in financial distress to restructure their own affairs
  • Simplifying the liquidation process for eligible incorporated small businesses
  • Support for the insolvency sector

Boosting apprenticeships wage subsidy

The Government will provide $1.2 billion over four years from 2020-21 to increase the number of apprentices and trainees employed and build a pipeline of skilled workers to support Australia’s economic recovery.

From 5 October 2020 to 30 September 2021, businesses of any size can claim the new Boosting Apprentices Wage Subsidy for new apprentices or trainees who commence during this period.

Eligible businesses will be reimbursed up to 50 per cent of an apprentice or trainee’s wages worth up to $7,000 per quarter, capped at 100,000 places. The wage subsidy will support school leavers and workers displaced by the COVID-19 related downturn to secure sustainable employment.

Higher education

The Government will provide an additional $903.5 million over four years from 2020-21 to provide more places and support for people wanting to access higher education due to the impact of COVID-19, to establish new quality protections for the higher education system, and for the Job-ready Graduates reforms.

Funding includes:

  • Creating disciplines of Professional Pathway Psychology and Professional Pathway Social Work to reduce the student contribution amounts for students studying units as part of a pathway to professional qualifications
  • $298.5 million over four years from 2020-21 for an additional 12,000 Commonwealth supported places in 2021 in national priority areas to further meet demand for higher education
  • $251.8 million over two years from 2020-21 for an additional 50,000 subsidised higher education short course places across a range of discipline areas
  • $19.2 million over four years from 2020-21 (and $45.1 million over ten years to 2029-30) to revise the allocation method for the $5,000 Tertiary Access Payment and to enable universities to administer the payment to eligible outer regional, rural and remote commencing students who re-locate for their studies
  • $0.4 million over four years from 2020-21 (including $0.3 million in capital funding and $1.2 million over ten years to 2029-30) to ensure students maintain a reasonable completion rate and do not take on excessive study loads and Higher Education Loan Program (HELP) debt
  • $2.3 million over four years from 2020-21 (and $59.4 million in fiscal balance terms) to extend exemptions for eligible students from paying loan fees under the FEE-HELP and VET Student Loans (VSL) programs to 30 June 202• expanding the Tuition Protection Service from 1 January 2021 to provide services to full-fee paying domestic higher education students, as well as waiving the 2020 HELP and VSL Tuition Protection Service levies to further support education providers’ recovery from COVID-19.

Investment in new energy technologies

The Government will provide $1.9 billion over twelve years from 2020-21 to fund the Australian Renewable Energy Agency (ARENA), expand the investment mandate of the Clean Energy Finance Corporation (CEFC), and invest in low emissions technologies, network infrastructure, dispatchable generation and reliable supplies in the National Electricity Market (NEM).

The measure includes:

  • $1.4 billion to provide research and development investment for emerging low emission technologies
  • $95.4 million to create a co-investment fund that supports industrial, freight and agricultural businesses to reduce emissions
  • $74.5 million over four years from 2020-21 to create the Future Fuels Fund, which would enable businesses to integrate new vehicle technologies,
  • $67.1 million to expand the Regional and Remote Communities Reliability Fund to support pilot studies for microgrids
  • $52.2 million to lower energy costs in the building and hotels sectors while stimulating the economy
  • • $70.2 million to support the development of a technology-neutral regional hydrogen export hub to boost regional economies
  • $50.0 million over three years from 2020-21 to establish the Commonwealth Carbon Capture Use and Storage Development Fund

Modern Manufacturing Strategy

The Government will provide $1.5 billion over five years from 2020-21 to support the Modern Manufacturing Strategy which is focused on building competitiveness, scale and resilience in the Australian manufacturing sector.

Investment and support will focus on creating manufacturing strength and capability in six areas of comparative advantage and strategic interest.

These six National Manufacturing Priorities are: Resources technology & critical minerals processing; food & beverages; medical products; recycling & clean energy; defence; and space.

Funding includes:

  • $1.3 billion to establish the Modern Manufacturing Initiative which will support manufacturing projects focused on building long-term business collaboration at scale, translating research into commercial outcomes and bringing new products to market, and integrating local firms to deliver products and services into global value chains
  • $107.2 million to identify and address critical supply chain vulnerabilities by providing manufacturers support through the new Supply Chain Resilience Initiative
  • $52.8 million for a second round of the Manufacturing Modernisation Fund, which co-funds capital investments that help manufacturers scale-up, invest in new technologies, create and maintain jobs, and upskill their workers
  • $30.0 million to the Advanced Manufacturing Growth Centre to continue to support projects, in consultation with other Industry Growth Centres, to build the capability and competitiveness of the manufacturing sector in alignment with the National Manufacturing Priorities
  • $20.0 million to Industry Growth Centres, including the Advanced Manufacturing Growth Centre, Food Innovation Australia, METS Ignited and MTPConnect in support of the Modern Manufacturing Strategy.

Driving jobs through housing

The Government will provide $0.6 million to boost housing demand and support the residential construction industry through:

  • Extending the First Home Loan Deposit Scheme to provide an additional 10,000 guarantees in 2020-21 to allow eligible first home buyers to build a new home or purchase a newly constructed home sooner with a deposit of as little as 5 per cent
  • Increasing the National Housing Finance and Investment Corporation’s (NHFIC) cap on total guaranteed liabilities to $3 billion to support the community housing sector by facilitating institutional investment to provide lower cost loans to community housing providers

Research and development

The controversy over the proposed $1.8 billion cuts to R&D tax incentives has finally been resolved.

The Government will instead be providing an extra $2 billion in Research and Development tax incentives.

This means that the cap on refunds is being removed and so businesses that invest the most will be rewarded. The Government will also be providing:

  • $459 million in additional funding to the CSIRO
  • $1 billion for new research funding for our universities
  • $1.9 billion in new funding as part of our energy plan to support low emissions and renewable technologies

Infrastructure to provide 40,000 more jobs

Treasurer Frydenberg opened his address by outlining the importance the Government is putting on jobs to rebuild the Australian economy. 

“There is no economic recovery without a jobs recovery,” he said. “There is no budget recovery without a job recovery. And this budget is all about jobs.” 

In order to create more jobs, the Treasurer has announced $14 billion will go to new and accelerated infrastructure projects to create 40,000 jobs.

The Treasurer also announced $2 billion will be dedicated to road safety upgrades on a “use it or lose it” basis for Australian states and territories. 

“If a state drags its feet, another state will get the money,” the Treasurer said. “We need works to start, not stall.”

The Treasurer also announced $1 billion for the Local Roads and Community Infrastructure program to upgrade local roads, footpaths and street lighting. 

He has said the Government hopes the program “will support local jobs.”

COVID-19 Response Package

Making Victoria’s business support grants non-assessable, non-exempt income for tax purposes

The Government will make the Victorian Government’s business support grants for small and medium business as announced on 13 September 2020 non-assessable, non-exempt (NANE) income for tax purposes.

State-based grants such as the Business Support Grants are generally considered taxable income by the Commonwealth. Given COVID-19 and the exceptional circumstances Victorian businesses are facing, providing this additional concessional treatment will assist in their recovery.

The Commonwealth will extend this arrangement to all States and Territories on an application basis.

Eligibility would be restricted to future grants program announcements for small and medium businesses facing similar circumstances to Victorian businesses.

Supporting Apprentices and Trainees

The Government will provide $2.8 billion to keep apprentices and trainees employed.
The Supporting Apprentices and Trainees (SAT) wage subsidy reimburses eligible businesses up to 50 per cent of an apprentice or trainee’s wages. Subsidies are capped at $7,000 per quarter, per eligible apprentice or trainee.

  • From 1 January 2020 to 30 June 2020, small businesses (of less than 20 employees) could claim the SAT wage subsidy for apprentices or trainees who had been in-training with the business as at 1 March 2020.
  • From 1 July 2020 to 31 March 2021, small and medium-sized businesses (of less than 200 employees) can claim the SAT wage subsidy for apprentices or trainees who have been in-training with the business as at 1 July 2020.

Support for exporters and the tourism sector

The Government has established a $500 million COVID-19 Export Capital Facility (the Facility) to provide loans of between $250,000 and $50.0 million for previously profitable export and tourism businesses that are unable to obtain commercial finance.

Government support for immediate cash flow needs to small and medium enterprises

As previously announced, the Government will support up to $40 billion of new lending through the Coronavirus Small and Medium Enterprises (SME) Guarantee Scheme.

Under the scheme, the Government will guarantee 50 per cent of new loans provided by eligible lenders to SMEs.

Export market development grants

In the reoriented EMDG program, multi-year grants will be available for eligible SMEs at three stages of their export journey:

  • Eligible SMEs who are new to export will be able to access grants totalling up to $80,000 over two years.
  • For eligible exporters who plan to expand their presence in current markets or enter new markets, grants totalling up to $240,000 over three years will be available. 
  • Finally, those exporters who continue to expand into new markets will be able to access further grants totalling up to $450,000 over three years.

To be eligible for the EMDG program, SMEs will need to be export-ready and have a turnover of less than $20 million.

Changes to the Fringe Benefits Tax (FBT)

The Government will introduce an exemption from the 47 per cent fringe benefits tax (FBT) for employer-provided retraining and reskilling benefits provided to redundant, or soon to be redundant employees where the benefits may not be related to their current employment.

This measure applies from announcement. 

Instant Asset Write Off

Tonight the Government announced the “largest set of investment incentives any Australian Government has ever provided.”

Small, medium and larger businesses with a turnover of up to $5 billion until June 2022 are set to benefit from new instant asset write off rules.

Over 99 per cent of businesses will be able to write off the full value of any eligible asset they purchase for their business.

“It will dramatically expand the productive capacity of the nation and create tens of thousands of jobs,” said the Treasurer.

Companies that have been struggling will also be able to use their losses earlier.

“Losses incurred to June 2022 can be offset against prior profits made in or after the 2018‑19 financial year,” said the Treasurer.

“The combination of the immediate expensing and loss carry-back measures will create an additional 50,000 jobs across the country.”

These measures, combined with the Government’s proposed reforms to insolvency and credit laws, aim to help Australian businesses get back to profitability and keep people employed.

Increase the small business entity turnover threshold

The Government will expand access to a range of small business tax concessions by increasing the small business entity turnover threshold for these concessions from $10 million to $50 million. Businesses with an aggregated annual turnover of $10 million or more but less than $50 million will for the first time have access to up to ten further small business tax concessions in three phases:

• From 1 July 2020, eligible businesses will be able to immediately deduct certain start-up expenses and certain prepaid expenditure.

• From 1 April 2021, eligible businesses will be exempt from the 47 per cent fringe benefits tax on car parking and multiple work-related portable electronic devices (such as phones or laptops) provided to employees.

• From 1 July 2021, eligible businesses will be able to access the simplified trading stock rules, remit pay as you go (PAYG) instalments based on GDP adjusted notional tax, and settle excise duty and excise-equivalent customs duty monthly on eligible goods under the small business entity concession. Eligible businesses will also have a two-year amendment period apply to income tax assessments for income years starting from 1 July 2021, excluding entities that have significant international tax dealings or particularly complex affairs. In addition, from 1 July 2021, the Commissioner of Taxation’s power to create a simplified accounting method determination for GST purposes will be expanded to apply to businesses below the $50 million aggregated annual turnover threshold.

Women’s economic security package

The Government will provide $231 million over four years from 2020-21 for the Second Women’s Economic Security Package.

This includes $35.9 million over five years from 2020-21 (including $6.5 million in 2024-25) to increase the number of co-funding greats to women-founded start-ups under the Boosting Female Founders Initiative and to provide access to expert mentoring and advice from women entrepreneurs.

The package also includes:

  • $90.3 million over three years from 2020-21 for concessional work test arrangements for Paid Parental Leave in response to COVID-19.
  • $47.9 million over four years from 2020-21 to increase grants for the Women’s Leadership and Development Program.
  • $25.1 million over five years from 2020-21 (including $3.0 million in 2024-25) to establish new Women in Science, Technology, Engineering and Mathematics (STEM) initiatives, and a further $14.5 million over four years from 2020-21 to support existing initiatives.
  • $24.7 million over four years from 2020-21 to streamline the servicing arrangement of ParentsNext and modify the eligibility to provide assistance to parents most in need
  • $2.1 million over three years from 2020-21 to establish a Respect@Work Council to assist in addressing sexual harassment in Australian workplaces.

Supporting Regional Australia

The Government will provide $552.9 million over four years from 2020-21 (and $16.6 million in 2024-25 and $16.1 million per year ongoing) for a package of measures to support regional Australia to recover from the impacts of COVID-19 and recent natural disasters, build resilience to future economic shocks and support long term economic growth.

Further information for the breakdown of specific projects can be found on the Treasury website.

Drought Response, Resilience and Preparedness Plan — further support for farmers and communities in drought

The Government will provide an additional $2.2 billion over five years from 2019-20 for a package of measures to support farmers and communities in drought.

The package supports immediate action for those in drought, support for the wider communities affected by drought and support to build long-term drought resilience and preparedness.

The package provides additional funding for concessional loans provided through the Regional Investment Corporation (RIC) and adjusts the eligibility and conditions for drought-related loans, including by ceasing the availability of interest-free terms for new applicants after 30 September 2020.

New funding includes:

  • $2.0 billion of additional loan funding in 2020-21 for drought related loans
  • $75.0 million of additional loan funding in 2020-21 for AgriStarter loans
  • $50.0 million over four years from 2020-21 for the RIC to administer these additional loans.

National Bushfire Recovery Fund

Assistance to small businesses and primary producers, including:

  • Grants of up to $75,000 for primary producers and up to $50,000 for small businesses and not-for-profit organisations
  • Concessional loans of up to $500,000 for eligible small businesses (including primary producers) and non-profit organisations
  • $76.0 million for a tourism recovery package
  • $15.0 million for rural financial counsellors and support works to assist primary producers
  • Grants of $10,000 to assist significantly impacted small businesses in the worst affected LGAs
  • $15.0 million to assist the forestry industry with the costs of transporting burned salvaged logs to timber mills or storage sites
  • $12.8 million to provide recovery and resilience advice to businesses – $3.5 million for financial advice telephone service for small businesses
  • $3.5 million for legal assistance to businesses in bushfire affected LGAs.

Personal income tax cut

More than 11 million taxpayers are eligible for tax cuts backdated to 1 July 2020.

The income tax threshold for 19 per cent will increase from $37,000 to $45,000, and lifting the 32.5 per cent threshold from $90,000 to $120,000.

In 2020-21, single low and middle income earners will receive up to $2745 tax relief and dual income families can receive up to $5490 in cash.

  • The income owners with $40,000 earnings will have 21 per cent tax reduction
  • The income owners with $60,000 earnings will have 17 per cent tax reduction
  • The income owners with $80,000 earnings will have 11 per cent tax reduction
  • The income owners with $160,000 earnings will have 5 per cent tax reduction

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