President's Report October 2020
I’d like to talk about two significant developments that will have a positive effect on Australia and our industry in particular.
On Tuesday 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. In his announcement, the treasurer announced more than $30 billion in tax cuts for business as part of its 2020-21 Federal Budget.
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.
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. There are a few gems in this budget for our industry that I would like to highlight:
- Two initiatives, an extension of the instant asset write-off and the new ‘Loss Carry-Back’ will assist businesses, encouraging them to invest as we emerge from the pandemic. From 6 October 2020, the instant asset write-off will be expanded to apply to businesses with aggregated annual turnover of less than $5 billion. It will apply to all new assets that are acquired and used/installed between 7:30PM AEDT on 6 October 2020 and 30 June 2022. The cost of these new assets can be written off in full in the year that the asset is first used or installed ready for use, in a business.
- Businesses with aggregated annual turnover of less than $500 million can write off second-hand assets costing less than $150,000 so long as they are purchased by 31 December 2020. Businesses will have a further six months until 30 June 2021 to use or install the asset.
- The Government has announced temporary ‘loss carry back rules’ for Australian companies. A similar loss carry-back scheme was briefly introduced in 2012-13 under the Gillard government, in response to the global financial crisis, but was scrapped within two years. The proposed scheme is designed to generate a cash-flow boost to companies by providing a cash refund of tax previous paid in respect of the 2018-19 year of income (or later years) where the company subsequently incurs a tax loss in the 2020, 2021 or 2022 financial years (“FY20-FY22”).
- The JobMaker Hiring Credit will be available to eligible employers for up to 12 months from employment start date for each additional eligible employee aged 16 to 35 years hired from 7 October 2020 to 6 October 2021. Eligible employers who can demonstrate that the new employee will increase overall employee headcount and payroll will receive $200 per week if they hire an eligible employee aged 16 to 29 years, or $100 per week if they hire an eligible employee aged 30 to 35 years.
- From 5 October 2020 to 30 September 2021, businesses of any size can claim a new “Boosting Apprentices Wage Subsidy” for apprentices or trainees who commence during this period.
- Eligible businesses will be reimbursed up to 50 per cent of an apprentice or trainee’s wages, up to $7,000 per quarter.
There are many other announcements in the Federal Budget that are applicable to our industry and your businesses, and I encourage you to investigate and take advantage of them. Our industry has fared better than most during the pandemic and recession and we should remain positive as these incentives open our economy.
The second significant development was that a La Niña weather cycle was announced by the Bureau of Meteorology. The increased rainfall and cloudiness in the western Pacific associated with La Niña usually means above-average winter–spring rainfall for Australia, particularly across the east and north. The six wettest winter–spring periods on record for eastern Australia occurred during La Niña years. In the Murray–Darling Basin, winter–spring rainfall averaged over all 18 La Niña events (including multi-year events) since 1900 was 22% higher than the long-term average, with the severe floods of 1955, 1988, 1998 and 2010 all associated with La Niña. As water storages fill and the country takes a deep drink after years of drought, our customers and businesses have cause for real optimism over the months ahead.