Tuesday’s Budget from the Federal Government, in which it continues its robust effort to deal with the fallout of the Covid-19 pandemic, has been followed by an abundance of commentary. In this note, I add my thoughts, with the key issues for our clients in mind.

Last year’s Budget was delivered shortly before the 2019 election. At the time I observed that Australia’s economic strength was a credit to the Government, however this was being overshadowed by party in-fighting and leadership changes. How things change in a year!

Since the onset of Covid-19, the Morrison Government has offered firm leadership and targeted stimulus to keep Australian businesses open, and individuals employed. The JobKeeper and Cash Flow Boost programs have provided tremendous assistance to so many of our clients’ businesses, enabling them to retain employees and continue trading.

This week’s Budget is, in my view, a further positive response, to the enormous challenge that Australia faces.

There has been some criticism of the Government’s plan, primarily by representatives of sectors who feel overlooked. It is impossible to please everyone, rather, the Government has stayed focussed on stimulating economic activity. The measures centre on encouraging businesses to keep teams employed, recruit young people and invest, whilst individuals will have more disposable income in their pockets.

The scale of stimulus spending, tax cuts and investment incentives is unprecedented. Consequently, the forecasted deficit is enormous. Whilst it will be a long time before we emerge from the impact of this crisis, our economy is stronger than most, and capable of the long-term recovery.

Only time will tell if the Government’s strategy will be effective, but I applaud their daring approach which has both immediate, medium, and longer-term elements. If it is as effective as the stimulus programs introduced at the beginning of the pandemic, I believe we have cause to be optimistic.

Some of the more significant features of the budget include:

  • Bringing personal income tax cuts forward by one year at a cost of $12.5 billion.
  • A $1.3 billion boost in R&D incentives to encourage innovation.
  • For businesses, an immediate tax write-off for the purchase of depreciable assets, which continues to 2022. The previous cap of $150k per asset, has been removed.
  • Anticipating losses in 2020 and 2021 years, companies will be able to offset loss in those years against tax paid in 2018/19. This is anticipated to give corporate Australia a tax refund of up to $30 billion.
  • An additional $1.6 billion to provide 23,000 further home care packages.
  • The JobMaker cash grant scheme will pay $200 per week to encourage businesses to create jobs for younger workers. Whilst it sounds good, I think it will be administratively cumbersome and practically useless.
  • Wage subsidies for apprentices and trainees, and additional funding for university research and undergraduate places at a cost of $2.5 billion.

More detail can be found in the Institute of Chartered Accountants Budget Summary (click here for access).

As always, please feel free to give any of our team a call on (02) 9908 9888 to discuss the Budget and its impact on your affairs.

Here’s praying for a vaccine, and a return to the life we enjoyed before this pandemic. Stay safe, and thank God we live in Australia.