Last night (6 October 2020) the Treasurer, Mr Josh Frydenberg handed down the 2020-21 Federal Budget, being the first Budget since the Federal Election in May 2019, and since the COVID-19 pandemic.  This is also the first Federal Budget in 29 years to be announced during an economic recession.

Unsurprisingly, the projected cash budget surplus announced in last year’s Federal Budget has been abandoned. In the words of Mr Frydenberg, the economic response to the COVID-19 pandemic has come at a “significant cost”, with the deficit estimated to be $213.7bn for 2019-20, representing approximately -11.0% of estimated GDP.  The budget position is predicted to improve over the forward estimates, with the deficit to be gradually reduced over the four years to 2023-24.  The budget position over the forward estimates is as follows:

Year 2020-21 2021-22 2022-23 2023-24
Surplus/(Deficit) ($213.7bn) ($112.0bn) ($87.9bn) ($66.9bn)
% of GDP -11% -5.6% -4.2% -3.0%

GDP is predicted to contract to -1.5% in 2020-21, a deterioration from the outcome of -0.2% for 2019-20.  GDP is expected to grow to 4.75% for 2021-22 as the economy rebounds from recession. The unemployment rate for 2020-21 is forecast to peak at 8% in the December 2020 quarter, before falling to 6.5% by June 2022 quarter. The CPI is estimated to increase to 1.75% for 2020-21, up from the outcome of -0.3% for 2019-20.

This year’s Budget focuses on job creation and reducing the unemployment rate, with Mr Frydenberg stating in the lead up to handing down the budget “it’s our first, second and third focus”.  This is evidenced by the fast-tracking of $7.5 billion in infrastructure projects across the Commonwealth, as well as support packages for the manufacturing and skills sectors.

The Budget also contains a plan to provide the economy a ‘kick start’, with individual tax rate cuts being fast-tracked to place more money back in people’s pockets and encouraging business investment with a ‘full value’ eligible asset write-off.

Mr Frydenberg said that “Tonight, we embark as a nation on the next phase of our journey. A journey to rebuild our economy and secure Australia’s future. Our plan will grow the economy. Our plan will create jobs. Our plan will continue to guarantee the essential services Australians rely on. Without increasing taxes.”

This Budget is potentially the most important for a generation, and was touted by some as being the most important since the end of the second World War. Undoubtedly the measures in this Budget will play a key role in Australia’s economic recovery.

Federal Budget 2020: five key focuses for SME business

Five key ways in which your business will be impacted and actions you should be taking now.

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Small to medium business

SMEs will benefit from a range of tax concessions with the Government increasing the turnover threshold for eligibility from $10 to $50 million, meaning growing businesses will continue to be able to access a suite of concessions.

Business

Over $30 billion in tax cuts are geared to businesses to encourage investment, including an immediate expansion of the instant asset write-off. Broader FBT exemptions, temporary loss carry-back scheme and reforms to insolvency laws will also benefit business.

Individuals

Individuals should soon be able to benefit from fast-tracked tax cuts putting money straight into their pockets. A CGT exemption for granny flats and proposed changes to tax deductions for reskilling/retraining will also provide relief.

Superannuation

Funding will be provided over four years to implement the Government’s ‘Your Future, Your Super’ reforms. These will include a YourSuper online government comparison tool, stapled superannuation accounts that will move with the individual, and systems to ensure trustee accountability and transparency.

R&D incentives

Changes to the R&D Tax Incentive include removal of the proposed $4 million cap on R&D refunds and higher R&D incentives for upping the intensity of their R&D spend.  These measures are big wins for companies looking to innovate.                                                                                

COVID-19 measures

A JobMaker Hiring Credit will encourage employers to hire eligible, young individuals and a Boosting Apprentices Wage Subsidy will be available for businesses of any size. Other initiatives directly combatting the economic fallout of COVID-19 include business support grants and a JobKeeper extension.

Post Budget Insights

13 October 2020 | How will the Federal Budget support Victoria’s Technology industry?

Victoria’s technology and startup businesses play a key part in both the State and Federal economy.

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13 October 2020 | Will we really be “all in this together”? – State versus Federal Budget agendas

The Treasurer delivered a budget that was vastly different from a traditional election budget. This business-friendly, big-spending budget is designed to do one thing only – stimulate the post-COVID economy to create jobs, jobs, and more jobs!

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12 October 2020 | 2021 Budget update – How it affects medical practices and practitioners

On 6 October 2020 the Federal Budget was handed down and there were no real surprises either good or bad, although there were some items of interest for Medical Practices and Practitioners.

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8 October 2020 | 97% of tax revenue comes from five taxes, let’s talk about the remaining 3%

In Australia, five taxes make up 97% of our tax revenue, so what are these five and does the remaining 3% revenue provide an opportunity?

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13 October 2020

R&D Insights

Dr Rita Choueiri, Director of R&D Incentives highlights the key grants and incentives announced in the 2020 Federal Budget.

13 October 2020

Manufacturing Insights

Sharon Grice, Director of Tax Services explores the impact of the 2020 Federal Budget on Victorian manufacturing businesses.

 

2020 Budget spokespeople

Greg Travers, Director

Small Business and International

Jack Qi, Director

Tax – Technology and Innovation

Belinda Hudson, Director

Business Advisory – Health

Neil Brennan, Director

Business Advisory – Property

Ian Cattanach, Director

Business Advisory – Manufacturing

Adrian Frinsdorf, Director

Wealth Advisory – Wealth

Tricia Kleinig, Principal

Superannuation

Federal Budget media commentary

5 October | Federal Budget wish list is long for small businesses struggling with coronavirus

Shops without customers, tourist attractions without visitors and salons unable to operate. That’s the reality for many businesses during the coronavirus pandemic.

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2 October | Federal budget a ‘missed opportunity’

The upcoming federal budget is likely to focus on short-term stimulus rather than long-term reform and could see the SG increase delayed.

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2 October | WA manufacturers warn they could miss out Scott Morrison’s $1.5b plan for the sector

Trent Antonio, Director, Business Advisory at William Buck spoke to The West Australian about the Federal Government’s $1.5 billion pre-Budget manufacturing promise.

2 October | Australian small businesses to receive tax breaks in upcoming Federal Budget

Thousands of small businesses will get access to tax breaks and red tape cuts under a $112 million plan to be outlined in next week’s federal budget.

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7 September | Federal Budget Tax Cuts

Todd Want, Director of Tax Services provided commentary for the Finance segment on the ‘Today Show’,  which covered an analysis on the proposed Federal Budget Tax Cuts.

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July 23 | Federal Gov Fiscal Update

Treasurer Josh Frydenberg and Senator and Finance Minister Mathias Cormann announced some unsurprising numbers as part of an Economic and Fiscal Update.

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