It’s been touted as the most important Federal Budget since the end of WWII, and its aim is to mitigate the disastrous economic impact of Covid-19 while spurring on the Australian economy.
Here’s what was delivered as part of the belated Federal Budget for 2020, and how it’s set to impact real estate…
Tested like never before
“In 2020 Australians have been tested like never before,” Treasurer Josh Frydenberg reflected, with lives lost, businesses closed, and lives put on hold due to fires, flood and a pandemic.
“We are resilient people, a proud nation and we will get through this together. The Great Depression and two world wars did not bring us to our knees, and neither will Covid-19.”
Eye-watering deficit and debt
It’s little secret Covid has hit the Australian economy hard, but tonight the Treasurer put a figure on exactly how big that hit will be.
The Covid response will see the budget deficit reach $213.7 billion this year, falling to $66.9 billion by 2023/24.
Between economic stimulus, wage subsidies and tax cuts, the government will ultimately incur a debt in the vicinity of $1 trillion by 2024.
“This is a heavy burden, but a necessary one to deal with the greatest challenge of our lifetime,” the Treasurer explained.
For now, billions of dollars of stimulus has been fast tracked as the government seeks to underpin the economy to spur on employment and consumer confidence.
“Tonight, we embark as a nation on the next phase of the journey – a journey to rebuild our economy and secure Australia’s future,” Mr Frydenberg said.
Make no mistake, this budget is focussed on creating jobs and central to that plan is JobMaker. The initiative sees business offered a hiring credit to encourage the employment of young people.
Payable for up to 12 months, it is immediately available to employers who hire those on JobSeeker aged 16-35.
It will be paid at the rate of $200 per week for those aged up to 30, and $100 a week for those aged 30-25. All businesses other than the major banks will be eligible.
Ultimate outcome? 450,000 jobs for young people.
Training and upskilling
Training will also be a focus, with the government pledging its support to JobTrainer, which is targeted at upskilling and reskilling school leavers and job seekers.
As part of the Budget, the government has committed an extra $1.2 billion to this initiative to create 100,000 new apprenticeships, with a 50 per cent wage subsidy to businesses who employ them
Personal tax breaks
More than 11 million tax payers will get a tax cut backdated to 1 July “generating billions of dollars of economic activity and 50,000 new jobs”.
“It will help local businesses keep their doors open and hire more staff,” the Treasurer said.
Lower and middle income earners will this year receive tax relief of up to $2745 for singles and up to $5490 for dual income families compared to 2019.
This is achieved by bringing forward proposed tax cuts by two years and lifting the 19 per cent threshold from $37,000 to $45,000, and the 32.5 per cent threshold from $90,000 to $120,000.
The low and middle income tax offset will also be retained for an additional year.
“The greatest benefits will flow to those on lower incomes,” the Treasurer said, “with those earning $40,000 paying 20 per cent less tax and those on $80,000 paying 11 per cent less tax this year”.
“In a modern economy workers and businesses need to adapt, and so should our tax system.”
Instant business write-offs
“Eight out of every 10 jobs in Australia are in the private sector. It is the engine of the Australian economy and it needs a kickstart,” Mr Frydenberg said.
Tonight, the government went further than the instant asset tax write-off announcing substantial investment incentives for business.
“From tonight 99 per cent of Australian businesses will be able to write-off the full value of any eligible asset they purchased for their business,” the Treasurer said.
“This will be available for small, medium and large businesses with a turnover of up to $5 billion until June 2022.
“It’s a game changer and it will unlock investment,” Mr Frydenberg claimed.
Business tax cuts
“Through no fault of their own millions of small and medium-sixed businesses have faced lockdowns and restrictions that have severely impacted their ability to trade,” the Treasurer continued.
“In order to keep their workers these businesses need our help to grow, they cannot wait for years for the tax system to catch up.”
As a result, the Federal Government is allowing businesses to use the losses incurred to June 2022 to be offset against prior profits made in or after the 2018/19 financial year.
It’s expected the initiative will allow for 50,000 extra jobs across the nation.
Australian manufacturing has emerged as a major focus, with the government announcing a $1.3 billion modern manufacturing plan targeting six priorities – food and beverage; resources technology and critical minerals processing; medical products; recycling and clean energy; defence industry and space industry.
“This plan is built on the JobMaker platform of enabling our manufacturing businesses to be globally competitive through cheaper and reliable energy, better skills and training, lower taxes, less red tape and more flexible workplaces,” the Treasurer said.
Lower emissions and climate change
The environment also got a mention, with the Treasurer pledging $1.9 billion in new funding as part of an energy plan to support low emissions and new technologies which help to lower emission and address climate change.
Road, rail and bridges
In a bid to spur on the economy through infrastructure, the government announced it will expand its 10-year infrastructure pipeline.
Measures will see $14 billion in new and accelerated projects to support a further 40,000 jobs, boost productivity and deliver economic benefits.
“We know that building more infrastructure means building and creating more jobs,” Mr Frydenberg said.
“Tonight, we will help thousands of Australians achieve their dream of home ownership, and in doing so, we will support thousands of jobs across the construction sector,” the Treasurer said.
As foreshadowed, an additional 10,000 first home buyers will be eligible for the First Home Loan Deposit Scheme.
“In this budget, we are also enabling an additional $1 billion of low cost finance to support the construction of affordable housing,” Mr Frydenberg said.
“This takes the total concessional finance that has been made available to community housing providers to $3 billion, and it’s in addition to the $4.6 billion a year that we provide in rental assistance.”
“You are not alone,” was the message from the Treasurer, who acknowledged Covid-19 extended far beyond the physical and financial impacts to take a mental toll.
Additional funding is to be directed to support services, taking the government’s financial commitment to $5.9 billion.
Superannuation was also in the spotlight, with the Treasurer noting $3 trillion was currently held in the superannuation accounts of Australians.
“Too many Australians are paying too much in their superannuation fees,” he stated, noting fees exceeded annual household electricity and gas costs combined.
“Tonight I announce that new super accounts will no longer be automatically created every time a worker changes jobs. Under our reforms, your super will follow you.”
Superannuation funds will now be required to meet an annual performance test, and poor performing funds will be required to notify their members of their poor performance, while a government backed comparison tool will also be initiated.
Rounding out his budget speech, the Treasurer noted the global economic environment remained uncertain, with the fallout to be felt for many years to come.
“In Australia the economy is forecast to fall by 3.75 per cent this calendar year and unemployment to peak at 8 per cent in the December quarter.
“Next calendar year the economy is forecast to grow by 4.25 per cent, and unemployment to fall to 6.5 per cent by the June quarter 2022.
“Our economic and fiscal strategy sets out the path to grow our economy, to stabilise the debt and to reduce it over time.
“It has two phases; first it focuses on boosting consumer and business confidence, growing the economy and creating jobs.
“And once the recovery has taken hold and the unemployment rate is on a clear path back to pre-crisis levels, comfortably below six per cent, we will move to the second phase where there is a deliberate shift from providing temporary and targeted support to stabilising gross and net debt as a share of the economy.
“We will then rebuild fiscal buffers so that we can be prepared for the next economic shock.
“More people in jobs means a stronger budget position.”