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Support for business
July 2020 Economic and Fiscal Outlook
Prospects of tax reform
As expected, there were no further tax announcements or stimulus measures announced in the Treasurer’s update on the Economic and Fiscal Outlook on 23 July.
The focus of announcements earlier this week were primarily on income support; namely JobKeeper and the Coronavirus Supplement payments. The Prime Minister has indicated that the 2020-21 Federal Budget on 6 October will have a focus on tax measures that generate investment and create jobs. At that time, the health and economic position will have further evolved and Treasury projections will have been updated.
The Council of Federal Financial Relations, which is the meeting of state Treasurers, together with the Federal Treasurer, has been tasked to take forward the issues on tax reform and on deregulation.
Significant declines in tax receipts
In the Economic and Fiscal Outlook, the Treasurer provided a two year projection of company tax collections over the period 2019-2020 to 2020-2021, reflecting a difficult period ahead.
It can be seen that company tax collections are now forecast to materially drop relative to previous Government estimates, reflecting the significant impact on revenues and profits of corporate Australia.
July 2020 Economic & Fiscal Outlook
Recent stimulus measures
Over the past month the Government has been announcing a stream of stimulus measures to support growth as follows:
Next phase Coronavirus SME Guarantee Scheme
On 20 July, the Treasurer announced the Coronavirus SME Guarantee Scheme, by which the Federal Government partners with approved lenders to guarantee 50 per cent of new unsecured loans to SMEs with a turnover of up to $50 million, will be extended. The scheme was to guarantee up to $40 billion of new lending, yet to date only $1.5 billion of loans had been accepted. It was to expire on 30 September 2020.
The second phase of the Scheme will start on 1 October 2020 and will be available until 30 June 2021. Key changes include:
- Extending the purpose of loans able to be provided beyond working capital, such that a wider range of investment can be funded;
- Permitting secured lending (excluding commercial or residential property);
- Increasing the maximum loan size to $1 million (from $250,000) per borrower;
- Increasing the maximum loan term to five years (from three years); and
- Allowing lenders the discretion to offer a repayment holiday period.
JobTrainer skills package
On 16 July 2020, the Prime Minister announced an investment of $2 billion in training. This package included an additional $1.5 billion to expand the apprentice wage subsidy for employers.
This builds on the 12 March 2020 announcement of $1.3 billion for an apprentice wage subsidy for small business. Eligible employers were able to apply for the wage subsidy of 50 per cent of the apprentice’s or trainee’s wage for up to 9 months from 1 January 2020 to 30 September 2020.
The scheme will now be expanded to medium businesses with less than 200 employees for apprentices employed as at 1 July 2020. The program will also be extended by six months to March 2021. The initiative covers 50 per cent of the wages paid to apprentices and trainees, up to $7,000 per quarter.
Other significant Federal industry and infrastructure stimulus announcements in June and July 2020 are listed here:
- 4 June 2020: HomeBuilder $680M
- 8 June 2020: Childcare removed from JobKeeper - transitional payment of $708M
- 9 June 2020: Extending the Instant Asset Write-off for further six months
- 21, 22, 24, 25, 29 June & 6 July 2020:
- Infrastructure – Northern Territory $53M
- Infrastructure – Queensland $415M
- Infrastructure – Western Australia $223M
- Infrastructure – Australian Capital Territory $35M
- Infrastructure – South Australia $145M
- Infrastructure – Tasmania $46M
- Infrastructure New South Wales $1B
- Infrastructure Victoria $525M
- 25 June 2020: JobMaker - Creative Economy $250M
- 17 July 2020: Expanded Location Incentive Program (Screen industry) $400M
What can business expect next?
The Budget on 6 October 2020 is expected to be the next significant date with respect to announcements on business and company tax measures.