2020 has been marred by an unprecedented global health pandemic but last night the economic realisation of this health crisis hit home. The global economic contraction in 2020 is 45 times worse than the 2009 Global Financial Crisis.
These are unprecedented times and called for an unprecedented economic stimulus package to ensure the recovery is swift and powerful.
That is why much of the stimulus is front-loaded, proportionate and temporary.
It is aimed at boosting confidence and returning to economic growth as quickly as possible.
Unashamedly, Treasurer Josh Frydenberg’s strategy is about job creation. The quickest way for Australia to recover economically is to get people off welfare and into a tax-paying job.
There are many specific announcements and much analysis from economic commentators about the macroeconomic indicators, and budget predictions (for example a COVID-19 Vaccine in 2021); HVIA has focused on providing information below on what we believe is most relevant to our industry.
If you wish to learn more, click here for the full budget overview and analysis.
This year our industry has been well-served by the hard fought for stimulus measures including the Backing Business Investment incentive and the Instant Asset Write-off.
We fought hard to have the latter extended until the New Year, and its effectiveness has been recognised in this budget, now being extended even further (available to 99% of businesses up to turnover of $5bn), extended (any asset value) and pushed out until 30 June 2022. This is an amazing boost for our industry!
The 50% wage subsidy for Apprentices and Trainees is another solid commitment that will incentivise HVIA members to get young people into a career in the heavy vehicle industry.
There is also the Hiring Credit (up to $200 a week) for business, to support them to hire people aged 16-35, currently receiving JobSeeker and get them back into the workforce.
Tax cuts have been targeted at middle income earners and more than 11 million employees will have this back dated to 1 July 2020. The tax treatment of businesses is to be amended by allowing businesses who have losses (to 2022) offset these against profits made in 2018-19.
The $100 billion infrastructure pipeline over the next decade has been further increased with a further $14 billion in new money, much of which is targeted at shovel ready projects that indirectly support our industry.
Business is the engine-room of the economy and there is much in this budget for business.
Australians are resilient, our economy was in good shape, our capacity to invest to this magnitude is better then most other OECD countries and the debt and deficit levels whilst eye-watering is manageable in the short term.
If you have any questions, please feel free to contact us and we will endeavour to find the answer for you.
It is also worth making sure you have received advice from your advisers before acting on any of the announcements – noting the budget is not officially passed yet and can be amended in the Senate.
Todd Hacking
Temporary full expensing
From 7:30pm (AEDT) on 6 October 2020 until 30 June 2022, businesses with turnover up to $5 billion will be able to deduct the full cost of eligible depreciable assets of any value in the year they are installed.
The incentive will apply to around $200 billion worth of investment, including 80 per cent of investment in depreciable assets by non-mining businesses.
The cost of improvements to existing eligible depreciable assets made during this period can also be fully deducted.
Temporary loss carry-back
The Government will also allow companies with turnover up to $5 billion to offset losses against previous profits on which tax has been paid, to generate a refund. Loss carry-back will be available to around 1 million companies that employ up to 8.8 million workers.
Losses incurred up to 2021-22 can be carried back against profits made in or after 2018-19.
Eligible companies may elect to receive a tax refund when they lodge their 2020-21 and 2021-22 tax returns.
This measure will provide further cash flow support and promote investment by encouraging more businesses to take advantage of full expensing.
This measure is estimated to deliver $4.9 billion in tax relief to businesses over the forward estimates, and $3.9 billion over the medium term.
Full expensing significantly reduces the after-tax cost of eligible assets, providing a cash flow benefit. It creates a strong incentive for businesses to bring forward investment before it expires.
Full expensing builds on the enhanced instant asset write-off and the accelerated depreciation previously announced through the Backing Business Investment incentive.
JobMaker Hiring Credit
The JobMaker Hiring Credit will give businesses incentives to take on additional young job seekers. This will help young people access job opportunities as the economy recovers.
The JobMaker Hiring Credit will be available to employers for each new job they create over the next 12 months for which they hire an eligible young person, aged 16 to 35 years old.
Key facts
From 7 October 2020, eligible employers will be able to claim $200 a week for each additional eligible employee they hire aged 16 to 29 years old; and $100 a week for each additional eligible employee aged 30 to 35 years old.
New jobs created until 6 October 2021 will attract the JobMaker Hiring Credit for up to 12 months from the date the new position is created.
To be eligible, the employee must have received the JobSeeker Payment, Youth Allowance (Other), or Parenting Payment for at least one of the previous three months at the time of hiring.
Going halves on 100,000 new apprenticeship positions
The Morrison Government is backing trades to play a big role in Australia’s economic recovery, offering a 50 per cent wage subsidy on new apprenticeships, effective immediately.
The subsidy will be available to employers of any size or industry, Australia-wide who engage an Australian apprentice or trainee from 5 October 2020 until the 100,000 cap is reached.
Recommencing apprenticeships included
Under the new measure, employers will be eligible for 50 per cent of the wages for a new or recommencing apprentice or trainee for the period up to 30 September 2021, up to $7,000 per quarter.
This assistance will support 100,000 new apprentices across Australia, and is in addition to the Supporting Apprentices and Trainees wage subsidy which is helping small and medium businesses to keep their apprentices and trainees in work and training.
For more information read the Boosting Apprenticeships Commencements fact sheet.
For further information on how to apply for the subsidy, including information on eligibility, contact an Australian Apprenticeship Support Network provider.
Insolvency reforms to support small business
The Government is making changes to the insolvency framework to better serve Australian small businesses, their creditors and their employees.
The changes will introduce new processes suitable for small businesses from 1 January 2021, reducing complexity, time and costs for small businesses with liabilities under $1 million.
The changes will enable more Australian small businesses to quickly restructure and to survive the economic impact of COVID-19.
Where restructure is not possible, businesses will be able to wind up faster, enabling greater returns for creditors and employees.
These reforms are the most significant changes to the Australian insolvency framework in almost 30 years. They form part of the Government’s JobMaker plan to ensure Australia emerges from the pandemic with a stronger, more resilient and more competitive economy.
The need to give businesses and their creditors certainty is crucial to kick-starting confidence and activity as the economy transitions to the recovery phase.
Superannuation reforms
The Government says structural flaws in the superannuation system are letting too many Australians down:
- Unnecessary fees and insurance premiums are paid on unintended multiple accounts which are created when people change jobs and do not nominate a super fund. This results in a reduction in retirement savings.
- Australians are paying too much for their super with the fees amongst the highest in the OECD. Australians pay $30 billion a year in super fees which is more than what they pay for electricity and gas combined.
- There are too many underperforming products in the market and this is costing members millions in lost retirement savings.
- Funds lack accountability to their members for their conduct and the outcomes they deliver and there is inadequate transparency on how funds are spending members’ money.
The Government has already introduced several reforms that have helped Australians reduce the amount of unnecessary fees and unwanted insurance premiums they pay — all of which have increased their retirement savings.
Infrastructure to boost growth and jobs
Since the start of the COVID-19 pandemic the Government has committed to invest an additional $14 billion in new and accelerated infrastructure projects over the next four years.
These projects will support a further 40,000 jobs during their construction.
This investment is part of the Government’s record 10-year transport infrastructure investment pipeline, which has been expanded to $110 billion and is already supporting 100,000 jobs on worksites across the country.
This investment pipeline includes projects in every state and territory, as well as the generation-defining Melbourne to Brisbane Inland Rail and Western Sydney International (Nancy-Bird Walton) Airport.
Fast-tracking shovel-ready projects
The Government is providing an additional $3 billion towards shovel-ready projects to support further job creation and economic recovery, building on the $2 billion announced since May 2020.
This includes $2 billion to deliver small scale road safety projects as well as an additional $1 billion of funding for the Local Roads and Community Infrastructure Program, on top of the $500 million already announced.
These programs are expected to support over 10,000 jobs over the next two years.
Funding will be provided to state and local governments on a “use it or lose it” basis, with unused funding for road safety projects to be reallocated to states and territories that have successfully deployed their previous allocations.
This will help ensure projects are delivered efficiently and the economic stimulus effects are maximised.
Tax relief for individuals
From 1 July 2020:
- the low income tax offset will increase from $445 to $700;
- the top threshold of the 19 per cent tax bracket will increase from $37,000 to $45,000; and
- the top threshold of the 32.5 per cent tax bracket will increase from $90,000 to $120,000.
The Government will also provide additional targeted support to low- and middle-income Australians. In 2020-21, low-and middle-income earners will receive a one-off additional benefit of up to $1,080 from the low and middle income tax offset (LMITO).
The LMITO was to be removed with the commencement of Stage two, but the one-off additional benefit in 2020-21 will provide support to households and stimulus to the economy.
Together, bringing forward Stage two and providing the additional LMITO means more than 11 million Australian taxpayers will get a tax cut, with effect from 1 July this year, providing them with more money to spend on what matters to them.
As they spend their tax cuts this will help local businesses to keep their doors open and hire more staff.
More than 7 million individuals are expected to receive tax relief of $2,000 or more for the 2020-21 income year compared with 2017-18 tax settings. Low and middle income tax payers will receive relief of up to $2,745 for singles and $5,490 for dual income families.