Treasurer Josh Frydenberg will deliver his third budget on Tuesday evening in Parliament, marking yet another significant turn in the government’s debt levels since he declared the budget was ‘back in the black’ two years ago.
Despite Australia’s strong economic recovery from the pandemic, tomorrow’s budget is shaping up to be one of significant government investment. The Treasurer has indicated the government will not pull back on government spending, even though the budget’s underlying cash deficit this fiscal year will be $167 billion, according to Deloitte.
The government has already announced various budget measures ahead of its official release tomorrow, and here’s what we know will be included so far.
Treasurer Josh Frydenberg has given clear signals that the 2021-22 federal budget will contain significant new spending, as the government continues its efforts to drive down the nation’s unemployment rate to below 5%.
In a pre-budget speech at the end of April, Frydenberg confirmed the government is not yet ready to enter the next stage of its economic recovery plan by curtailing spending, despite the fact that COVID-19-related debts will leave the budget in deficit until 2028 at the earliest.
With an election in sight, and key economic indicators pointing to the need for continued expansionary measures, the nation’s SMEs and startups can expect millions of dollars worth of spending announcements on Tuesday evening.
Foreign students to work more hours
The Morrison government has announced it will remove existing work hour limits for student visa holders who are employed in the tourism and hospitality sectors.
Currently, international students are restricted to work 40 hours each week during study periods.
The government is also expanding the COVID-19 pandemic event visa to include tourism and hospitality. The visa, which is currently open to workers in critical sectors such as agriculture and health care, allows visa holders to work in the country for 12 months.
The changes have been welcomed by the tourism and hospitality industries, after the peak hospitality association Restaurant and Catering made calls for a COVID-19 recovery visa to help address the shortage of workers resulting from the international border closure.
Digital economy package
One of the big-ticket items in this year’s budget will be the government’s digital economy plan, announced last week.
The $1.2 billion package includes a shopping list of spending measures, most of which will benefit the SME and tech communities. This list spans from new rules around the depreciation of intangible assets, to a tax break for the local games industry.
There’s also funding to increase the awareness of e-invoicing for business, a commitment to review venture capital tax incentives and a $12.7 million extension to the Digital Solutions — Australian Small Business Advisory Services program.
Prime Minister Scott Morrison announced a $120 million deregulation package for business would be included in the budget, in a bid to reduce regulatory burdens on businesses.
Speaking at a Business Council of Australia dinner, Morrison said the four-year package will boost regtech solutions for wage compliance to help SMEs comply with modern awards using new technology.
The package will also streamline reporting requirements under the National Greenhouse and Energy Reporting Scheme, simplify digital services in the health sector, and review regulations imposed on commercial fishing businesses and the financial sector.
Changes to excise for distillers
Micro brewers and distillers will benefit from $225 million in tax relief from July, under new changes to excise tax that will be included in the upcoming federal budget.
Under a plan to “support jobs” in the sector, the excise refund cap for small brewers and distillers will be boosted from $100,000 to $350,000 per year, Treasurer Josh Frydenberg and Assistant Treasurer Michael Sukkar said in a joint statement.
Eligible brewers and distillers will also receive a 100% refund of any excise duty they pay, rather than the 60% refund that currently exists up to a cap of $100,000.
The government has announced big changes to its childcare subsidy ahead of the May 11 budget, including adding $1.7 billion to the $10.3 billion a year already budgeted for childcare.
This spending will particularly benefit families with two or more children under five; however, it will also help couples with a combined income of more than $189,390 by removing the subsidy cap that restricts them to a maximum of $10,560 per child a year.
The government says the changes “deliberately target low and middle income earners, with around half the families set to benefit having a household income under $130,000”.
Last week, Treasurer Josh Frydenberg announced the government will look to introduce a number of insolvency reforms that build on the changes that came into effect in January.
A series of reviews aimed at “further simplifying and streamlining” insolvency laws will look at Trusts, schemes of arrangement processes and insolvent trading safe-harbour provisions. The government also plans to increase the threshold at which creditors can issue statutory demands on a company, from $2,000 to $4,000.
Support for private education providers
Private higher education providers will receive a $53 million support package in the budget, as the sector continues to be affected by national border closures.
The support package will include $26.1 million for an extra 5,000 short course places in 2021-22 for Australian students; $9.4 million for an innovation fund to provide grants of up to $150,000 for providers to deliver their courses online or offshore; and $17.7 million to further pause fees and charges from a number of government regulators and agencies until the end of December this year.
The government will also offer further FEE-HELP loan fee exemptions for around 30,000 existing and prospective students until the end of the year, and reduce fee reporting requirements for providers.
The Morrison government has pledged $539.23 million for investment in low-emissions technology.
Of that funding, $275.5 million is pegged to accelerate the development of four additional clean hydrogen hubs, and to implement a ‘clean hydrogen certification scheme’.
The other $263.7 million will be used to fund the development of carbon capture, use and storage projects, particularly through investment in science and entrepreneurialism.
Another round of Building Better Regions Fund
The government has confirmed it will fund new rounds of grant programs in the regions, including $250 million for the Building Better Regions Fund.
The fund offers grants of $20,000 to $10 million to cover 50% or more of costs involved in projects that will provide economic and social benefits for regional and remote areas.
Relocation grants for farm workers
The federal government will use the upcoming budget to revamp its agricultural work relocation grant scheme.
Under the banner AgMove, Australians will be able to apply for $2,000 in relocation assistance if they complete 40 hours of agricultural work over a fortnight.
If workers continue working on farms and complete 120 hours in four weeks, they will be eligible for reimbursement of up to $6,000 for Australian citizens, or up to $2,000 for temporary visa holders.
Last week, the Morrison government announced three new measures to help Australians purchase a home.
A Family Home Guarantee will be established, giving 10,000 guarantees over four years to single parents with dependants. It will allow them to purchase a home with a deposit of 2%, while the government guarantees the additional 18%.
The currently existing New Home Guarantee will be extended for another year, helping 10,000 first home buyers purchase or build a home with a deposit of at least 5%.
Finally, the government is increasing the cap on its First Home Super Saver Scheme, allowing Australians to access $50,000 instead of $30,000 to help buy a property. The scheme was introduced in 2017, and allows first home buyers to make contributions to an account that is treated like super for tax purposes.