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2020-21 Federal Budget Bulletin by Mazars

The 16 October 2020

Mazars debriefs on the government's stimulus package for the 2020/21 Federal Budget.

In order to revive an economy devastated by natural disasters and the global health pandemic of COVID 19, the 2020-2021 Australian Federal Government budget provides stimulus measures.

As of today, the government is projecting a record deficit of $213.7 billion (11% of GDP) and gross debt of 44.8% of GDP for the 2020-2021 budget period. These figures are not fixed, additional deficits will be added over the forecast period, but are projected based on the development and deployment of a COVID-19 vaccine towards the end of 2021. In order to achieve this, the government plans to first stabilize the economy and then reduce the debt.

What stimulus measures:

Investments in infrastructure, education, and workforce training,
Encouragement to hire young people through a JobMaker hiring credit,
Support for investment in manufacturing and research
Development and encouragement of companies to spend through significant tax incentives.

IN TERMS OF INDIVIDUALS:

Changes to tax rates;
Low income tax offset (LITO) tax cuts brought forward;
Low and middle income tax offset (LMITO) retained for FY2021; and
CGT exemption for granny flats.

IN TERMS OF BUSINESS:

Small business threshold extended to businesses with an aggregated turnover of up to $50 Million (from $10 Million) for certain concessions;
Instant asset write-off for depreciating assets acquired after 6 October 2020;
A temporary company loss carry-back mechanism will be introduced for companies with aggregated turnover of <$5 Billion;
Victorian Government tax-free business support grants;
The Research and Development (R & D) tax incentive rules will be enhanced to encourage more investment in R & D;
Technical amendments will be made to the corporate residency test;
The Government will “prioritise refurbishing Australia’s treaties with key strategic partners";
An FBT exemption for retraining and reskilling workers; and
The ATO will simplify FBT record keeping for businesses.

IN TERMS OF SUPERANNUATION:

For the first time in several years there was a welcome respite for Self Managed Superannuation Funds (SMSFs) with no changes announced. However, the Government did announce a “Your Future, Your Super” package with the intent to reform superannuation so that it works harder for Australians.

The four measures in this package are:

Stapled superannuation accounts;
'YourSuper' portal;
Increased benchmarking tests on APRA funds; and
Strengthening obligations on trustees of large APRA funds.

OTHER MEASURES:

JobMaker hiring credit to encourage businesses to take on additional employees;
Apprentice subsidy providing support of 50% of wages for 100,000 new apprenticeships or traineeships
Insolvency reforms to allow small business to quickly and efficiently restructure

Source: MAZARS