What you need to know from the Federal Budget 2021-2022

This week Josh Frydenberg released the Budget report for 2021-2022 and in short, he announced that “The Australian economy is well on its way to recovery.”

While the terrain that we are traversed so far has been tough and challenging, the good news is that overall, the Australian economy has fared much better than most around the globe. The previous Federal Budget in October 2020, the fiscal measures to manage the workforce and to encourage spending, as well as the successful health management of COVID-19, have all contributed to our current strong position.  However, as you will see from the figures below, this has blown out our deficit to $106.6 billion. However, hopefully from here on, the focus will be on initiatives to help support business growth and productivity towards economic recovery.  And in Josh Frydenberg’s third Federal Budget, the map has been updated with further way-finders to continue the climb to recovery for our economy.

A summary of the key announcements includes tax relief for low and middle-income earners, as well as for small to medium businesses. Superannuation changes and continuations will help women maximise their retirement savings, and there was a clear focus on keeping women in the workforce by boosting childcare. In addition, attracting global talent to Australia with changes to tax rules, will help capitalise on the enviable position we have found ourselves in globally.

A surprise announcement in this budget was the Patent Box Regime which is set to boost innovation – particularly in medical and biotechnology.

The main announcements mostly involved new spending to prime the economy and to prioritise what the Morrison Government sees as key areas such as aged care, family, domestic violence prevention and childcare.

While the pace of this part of our course will continue not to be an easy ride, it is safe to say the economic compass provided by this budget will deliver solid bearings, and a course correction to guide us through the next part of this much longer race. Additionally, we believe the Government hopes this budget provides a solid first leg in the journey towards the next federal election, due before May 2022. While we will, no doubt, have some hills and valleys to traverse along the way, the trail to recovery appears to be well within our sights.

A summary of the Federal Budget

Whether you are in business owner or not, here is a brief summary of how the budget will be allocated in supporting businesses, individuals and the economy towards recovery:

Economy

* Budget deficit of $106.6 billion in 2021/22

* Deficit narrows to $99.3 billion in 2022/23, $79.5 billion in 2023/24 and $57 billion in 2024/25

* Commonwealth net debt to rise to $617.5 billion in 2021/22 before hitting $980.6 billion in 2024/25

* Economic growth to rise by 4.25 per cent in 2021/22, before easing to 2.5 per cent in 2022/23

* Unemployment rate of 5 per cent in 2021/22, before falling to 4.75 per cent the following year

* Inflation as measured by CPI to be 1.75 per cent in 2021/22

Taxation

* Extra $7.8 billion in tax cuts for low- and middle-income earners, worth $1080 for individuals or $2160 for dual-income couples

* $25.1 billion of announced personal tax cuts will flow to households in 2021/22

Business

* Extension of temporary full expensing for an extra year to June 30, 2023.

* Temporary loss carry-back extended to include the 2022/23 income year

* Both measures will deliver an extra $20.7 billion in tax relief for businesses over four years

* Small businesses to get an easier path to pause or modify tax office debt recovery action through the Administrative Appeals Tribunal

* $16 billion in tax cuts for small and medium sized businesses by 2023/24

* $1.2 billion aviation and tourism sector package

* $1.5 billion modern manufacturing strategy

Women

* $1.1 billion for supporting victims of violence, including financial and legal help and emergency accommodation

* $20.5 million to implement the Respect@Work report by Sex Discrimination Commissioner Kate Jenkins

* $26.2 million for online safety initiatives

* $1.7 billion extra for childcare, increasing the subsidy for the second and subsequent child

* Removal of the $450 per month superannuation threshold

* $38.3 million women’s leadership program

* Subsidised treatments for certain types of breast cancer

Health

* $2.3 billion for improved and expanded mental health care and suicide prevention

* Mental health plan includes new adult mental health centres, Medicare listings, suicide prevention services and workforce improvements

* Further $1.9 billion investment in the vaccine rollout, expanding the number of doses on order to 170 million

* Investigating local production of mRNA vaccines

* Patent box to be introduced, giving a tax break for income derived from Australian patents in the medical and biotechnology sectors

Education

* $2 billion over four years for early childhood education, supporting access to at least 15 hours a week for all children in the year before school

* $289 billion in recurrent funding for schools over the decade

* 5000 extra short-course places at non-university higher education providers in 2021

Housing

* Extension of the HomeBuilder construction commencement period

* Further 10,000 places under the New Home Guarantee for first home buyers

* From July 1, 10,000 guarantees will be made available over four years for single parents to build a new home or buy an existing home with a deposit of as little as two per cent

* From July 1, 2022, First Home Super Saver Scheme voluntary contributions maximum amount will rise from $30,000 to $50,000

Infrastructure

* Extra $15.2 billion in infrastructure spending over the decade

* $215.4 million to support investment in dispatchable power generation

* $1.2 billion over 10 years for low-emissions technology

The Bush

* $3.5 billion National Water Grid Fund

* $414.5 million biosecurity package

* $172.5 million to be allocated out of the Future Drought Fund for projects, such as climate and soil data gathering

* $250 million extra from the Building Better Regions Fund

* Reinsurance pool for northern Australia backed by $10 billion government guarantee

* $189.6 million for ‘Our North, Our Future’ five year plan

* National Recovery and Resilience Agency and Australian Climate Service to be set up, in response to bushfires royal commission

Digital Economy

* $100 million to build digital skills

* Digital games developers to get 30 per cent refundable tax offset

* $200 million to overhaul the MyGov online system

Aged Care

* $17.7 billion to fund aged care reforms

* New funding model to start in October 2022

* 80,000 extra home care packages

* Extra 33,800 training places to boost the aged care workforce

Indigenous

* $243.6 million Indigenous budget, including skills and jobs programs and improved access to government services in remote areas

Veterans

* Extra $460.4 million for veterans, including a royal commission into defence and veteran suicide

Environment

* $29.3 million initial response to reform of environmental protection laws

Disability

* Extra $13.2 billion for the National Disability Insurance Scheme over four years

Retiree’s

* Extension of pension loans scheme, allowing a single person to receive lump-sum payments of up to $12,385 a year or $18,670 for a couple

* Repeal work test to allow Australians aged 67 to 74 more flexibility to contribute to their superannuation

* Minimum age of the downsizer superannuation contribution to be lowered from 65 to 60, allowing a post-tax contribution of $300,000 per person when they sell the family home

Security

* $1.3 billion over 10 years for ASIO

* $467.7 million to bolster domestic detention capabilities

* $747 million to upgrade four military training areas in the Northern Territory.