Economic and Fiscal update shows the impact of COVID-19
The Treasurer delivered an Economic and Fiscal update on 23 July 2020 which included key policy measures introduced since the start of the COVID-19 pandemic to aid individuals and business through the pandemic. To support the economic recovery, the Government is extending and further targeting temporary economic measures to support sectors, regions and communities that will continue to face challenges.
The underlying cash deficit in 2019-20 is expected to be $85.8 billion (4.3 per cent of GDP), a $90.8 billion deterioration since the 2019-20 Mid-Year Economic Fiscal Outlook (MYEFO). The estimate for 2020-21 has also been revised down, with an expected deficit of $184.5 billion (9.7 per cent of GDP), a $190.6 billion deterioration since the 2019-20 MYEFO.
Key Policy Measures (revisited):
Support for Individuals and Households:
- Expanded access to JobSeeker Payment and Youth Allowance;
- $750 Economic Support Payments to social security, veteran and other income support recipients and eligible concession card holders;
- Individual early access to superannuation with an extension of the application period from 24 September 2020 to 31 December 2020;
- Temporarily halving superannuation pension minimum drawdown requirements for the 2019-20 and 2020-21 income years; and
- Reducing the upper and lower social security deeming rates to 2.25 per cent and 0.25 per cent respectively from 1 May 2020.
Support for Businesses and Employers:
- Increasing the instant asset write-off threshold to $150,000 (up from $30,000) and expanding access to include taxpayers with aggregated annual turnover of less than $500 million (up from $50 million).
- Accelerated depreciation deductions aimed at supporting taxpayers with an aggregated turnover of less than $500m to deduct 50 per cent of the cost of new eligible assets, plus normal depreciation on the balance, in the year of acquisition, up to 30 June 2021.
- Cash Flow Boost of up to $100,000 (Non-Assessable, Non-Exempt) for eligible businesses.
- JobKeeper Payments: On 21 July 2020, the Government announced the JobKeeper Payment will be extended to provide continued support until 28 March 2021, with the Payment targeted to those businesses that continue to be most significantly affected by the economic downturn with assessment of decline in turnover now linked to the actual GST turnover. For more information please visit the JobKeeper Factsheet.
Supporting Australians to build their skills and return to work:
- Introduction of the JobTrainer Skills Package and extending the Supporting Apprentices and Trainees wage subsidy.
Supporting the flow of credit:
- Coronavirus SME Guarantee Scheme is supporting up to $40 billion of lending to help small and medium-sized businesses get through the pandemic impact. This scheme is now extended to loans written until 30 June 2021; and
- Reduction in bank funding costs measures implemented by the Reserve Bank of Australia.
Supporting COVID-19-affected regions and communities:
- Introduction of a COVID-19 Relief and Recovery Fund to provide direct support to the regions and communities most affected by the economic impacts of the pandemic.
Supporting local jobs and investing in infrastructure by:
- Prioritising regional and urban transport infrastructure across Australia to support local jobs and economic recovery post COVID-19.
Supporting industries most heavily affected by the COVID-19 pandemic:
- Targeted measures supporting businesses in the Childcare and Higher Education, Aviation, Aged Care, Arts and Entertainment and Housing Industry.
Given the current uncertainty, economic impacts and fiscal outlook, it may be worthwhile for businesses to reconsider and evaluate the merits of applying for a number of State and Federal Government grants and incentives, and a re-examination of any additional income tax deductions.
The deadline for a number of grants and incentive schemes has been extended due to the pandemic. In addition, given the change in business conditions, it may be worthwhile re-examining taxation lodgements including State and Federal deferment exemptions, in order to boost and maximise cash flow.
Our Partners and team at PKF Melbourne are ready to assist you with any queries in relation examining your financial outlook.
Please don’t hesitate to contact your lead partner or team member to discuss in further detail. Contact us on 03 9679 2222.