At 7.30pm tonight, Treasurer Josh Frydenberg will deliver what could be one of the most important budgets in recent history.
The coronavirus pandemic has fundamentally changed the way we do business in this country, and as business owners consider how to keep going during a recession, they’ll be looking closely at what the federal government intends to do to help them.
Under normal circumstances, the SmartCompany team would be in Canberra to participate in Treasury’s budget lockup and find out what’s in store for our readers.
But due to health and safety protocols, the lockup at Parliament House is this year being limited to press gallery journalists, while other media outlets have been given access to lockup arrangements in Sydney and Melbourne.
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It’s disappointing that SmartCompany has not also been given access to those arrangements.
SmartCompany has participated in each federal budget lockup since the publication was founded 13 years ago, and as a small business ourselves, we fall into the very category of businesses the government says it wants to support during these challenging times.
We still plan to bring a comprehensive look at this year’s budget and what it will mean for SMEs and startups, and we’ll have some of those details coming directly from the lockup via our colleagues at Crikey and The Mandarin.
In the meantime, we already have some sense of what we can expect in tonight’s budget — from a very big deficit, tax cuts and wage subsidies for new hires, to changes to fringe benefits tax exemptions and billions in spending for local manufacturing.
Here’s what we know so far.
What will be included
It will come as a surprise to no one that this year’s budget will be in deficit, and that deficit will be large.
The exact size of that deficit will be revealed tonight, but some estimates are putting it well over $200 billion, with a projected path back to surplus in 2024-2025.
Income tax cuts will be a key feature of the budget, with Labor indicating on Monday it will support the government’s plan to bring forward the second stage of the government’s slated tax cuts.
The second stage of the tax cuts was due to commence on July 1, 2022, but it is now likely these will be implemented within a matter of weeks.
According to reports this morning, the income tax cuts will not only be backdated to July 1 this year, but will also be “turbocharged” for the remainder of this year.
The Australian Taxation Office will “pro rata” the tax cuts from July 1 to October by increasing the tax cut for the final months of the year, reports news.com.au.
The second stage of the government’s tax cuts will increase the income threshold for the 19% tax bracket from $41,000 to $45,000, while also changing the threshold for the 32% tax bracket, from $90,000 to $120,000.
A third stage of tax cuts is still due to come into effect in 2024. This stage would apply an income tax rate of 30% across the majority of Australian workers earning between $45,000 to $200,000.
Wage subsidies for apprentices, trainees and young people
The government will spend $1.2 billion on a wage subsidy program it says will help support 100,000 new apprentices and trainees.
Similarly, the budget will also reportedly include a wage subsidy program for young people who have been unemployed. This program will be targeted at job-seekers aged under 35 who have been disproportionately affected by the coronavirus recession.
$800 million for a single business registry and other digital programs
This year’s budget will include a funding package worth $800 million, aimed at improving access to digital services for businesses.
Included in the package is $420 million to accelerate the government’s plans to create a single national business registry and cut red tape for small business operators.
The funding package will include $257 million to expand the government’s Digital Identity Program, including by integrating the program with the Director Identification Number (DIN) scheme.
It will also include $22.2 million to help small business owners “take advantage of digital technologies”.
Changes to fringe benefits tax and other small business tax concessions
The budget will include a $112 million package that will, among other things, change the fringe benefits tax (FBT) treatment of employee training.
Businesses are now exempt from paying the 47% FBT on retraining provided to employees who have been made redundant, or would soon be made redundant, so they can be given a new role in the business.
The government will also increase the small business entity turnover threshold from $10 million to $50 million, which will give eligible businesses access to small business tax concessions in a number of stages.
$1.5 billion manufacturing plan
Prime Minister Scott Morrison has already outlined six priority areas that will benefit from a $1.5 billion manufacturing plan, which will involve the government working with industry to identify growth opportunities.
These key areas are resources technology and critical minerals processing, food and beverage, medical products, recycling and clean energy, defence, and space.
Transport infrastructure projects
The government will spend $7.5 billion on national transport infrastructure in a bid to speed up a number of projects that are in their planning stages.
Among the key projects to receive federal government funding are stage one of the Coomera Connector project in Queensland, which will receive $750 million, rail upgrades for Shepparton and Warrnambool in Victoria, which will receive $528 million, and an upgrade to the Carpentaria Highway in the Northern Territory, which will receive $120 million.
CGT changes for granny flats
Treasurer Josh Frydenberg and Minister for Housing Michael Sukkar have announced plans for a capital gains tax exemption on ‘granny flats’.
The measure is intended to help provide safe accommodation for elderly or disabled Australians, and to boost the construction sector.
Incentive for fruit pickers
The budget will reportedly include incentives for young Australians on JobSeeker and Youth Allowance to work on farms, including by allowing them to earn additional income each week without seeing their welfare payments cut.
First home buyers’ scheme extended
The government will use the budget to extend its first home buyer loan scheme to allow another 10,000 first home buyers to secure a home loan with a deposit of as little as 5%.
What might be included
Loss carry-back provision for businesses
Small businesses and startups have a number of high-priority items on their budget wishlists, and for some, one of those items is a loss carry-back provision.
The Morrison government is reportedly considering adopting such a scheme, which would allow businesses to claim back tax paid on last year’s profits.
Australian small business and family enterprise ombudsman Kate Carnell supports the proposal, and says it would boost cashflow for businesses that were previously profitable but are now struggling.
Changes to the R&D Tax Incentive proposal
Members of the Australian tech community will be paying close attention tonight to see if the government chooses to walk back controversial changes to the R&D Tax Incentive.
The proposed Treasury Laws Amendment Bill, which would change the Research & Development Tax Incentive (RDTI), is currently being considered by the Senate Economic Legislation Committee, which is due to release its report in October.
The proposed change would put a $4 million cap on entitlements and create a tiered system for the incentive, taking out $1.8 billion from the scheme, but last week Prime Minister Scott Morrison indicated there may be some room to move.
Small business viability review program
Key members of the small business community also have urged the federal government to also include a small business viability review program in the budget.
Under the proposal, the government would fully fund a $5,000 subsidy that would allow small business operators to access tailored plans from accredited professionals about the viability of their business.
The call is being made by ombudsman Kate Carnell, CPA Australia, Chartered Accountants Australia and New Zealand, the Institute of Public Accountants, the Institute of Certified Bookkeepers, and the Council of Small Business Organisations Australia.