By Tony Sacre, CEO, Bentleys Network
The 2020 Federal Budget will prove to be the most watched budget in my lifetime. From the budget of ‘the recession we had to have’ to the budgets of both GFCs, there have been some budgets which were more watched than others, but I feel that no budget has had the same widespread impact on businesses and individuals as this one.
After entering our first recession in almost 30 years, COVID-19 has made 2020 a year to forget. It has also made this a budget to remember. With unemployment set to peak at just under 10 per cent (according to Mr Frydenberg) and gross debt to approach $1 trillion, the hopes and dreams of the nation are with the Treasurer as he articulates the Morrison Government’s strategy of sustaining our economic health, while positioning us for an economic fast-track recovery. This is no easy task. There will be some winners and losers from this year’s budget, with the Government looking to use its fiscal strength to help our economy rebound as quickly as possible.
While we have heard the catch-cry, “it’s all about jobs” for just about every budget in the last three years, on this occasion it is absolutely the case. The Government is focussed on getting the unemployment rate below 6 per cent (currently sitting at 6.8 per cent). It is expected to rise further with the impact of the further lockdowns in Victoria yet to be fully accounted for. Mr Frydenberg points out that this budget is about the ‘here and now’, and budget repair won’t commence until unemployment returns below the 6 per cent level.
Thus, while an expected deficit of in excess of $200 billion and gross debt approaching $1 trillion will be worrying for most, a silver lining is that the cost of funding the deficit has never been cheaper. This “affordability” emphasises the need to focus on the ‘here and now’, with the government looking to, in simple terms, stimulate economic growth and reduce unemployment. The quicker this is achieved the sooner the economy can return to surplus and repayment of debt commence.
The stimulus measures announced aim to encourage households to spend and invest. Planned personal tax cuts scheduled for 2022 have been brought forward to 1 July 2020 to kick-start the Australian economy. For businesses, changes to the R&D tax rules will incentivise innovation, and those with an aggregated turnover of between $10 million and $50 million can expect a tax break.
Other recent announcements have included:
- investing $7.5 billion in new infrastructure spending for the states
- upgrading the National Broadband Network
- extending the First Home Loan Deposit scheme
- changes to funding home care of the aged as an option to nursing homes
- allocating an extra $1.5 billion to the manufacturing sector, including a $1.3 billion fund for grants to companies that co-invest to boost production in six priority areas
- the creation of 100,000 new apprenticeships or traineeships supported by a 50 per cent wage subsidy
- removal of the 47 per cent fringe benefits tax for the provision of retraining provided by employers to redundant, or soon to be redundant employees
- $250 million investment in tourism and the regions.
The Morrison Government’s 2020 Federal Budget may well provide a pathway for our nation’s recovery from COVID-19. This is certainly one of the most important budgets ever released and is centred around getting Australia out of recession and back to work.
In these web pages, our team of tax experts share their interpretation of what the budget means for:
This Federal Budget analysis will be added to throughout the month of October with more targeted analyses to explore the impacts and opportunities for businesses operating in specific industry sectors. We encourage you to return to this page for further updates.
In the meantime, if you have any questions as to how this budget impacts you and your business, please contact your local Bentleys advisor. We are here to help you navigate these challenging times and get to help you get to where you want to be.
Disclaimer: This information is general in nature and should not be relied on as advice. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs and seek professional advice before making any decisions based on this information.