Pandemic recovery and support for businesses and individuals
Tax and superannuation changes for business
Tax changes for individuals: personal income tax rates and rebates
Measures to support employment & skills: JobTrainer extended
Measures to support employment & skills: apprenticeships
Measures to support employment & skills: investing in youth employment services
Measures to support employment & skills: providing career advice
Measures to support employment & skills: expanding the local jobs program
Measures to support skills reform
Measures to support employment & skills: Digital Economy Strategy
Workforce and community participation: childcare, NDIS, aged care and mental health services
Measures to support industry: defence industries and procurement
Measures to support industry: energy markets and climate change
Measures to support industry: business deregulation
Measures to support industry: increased biosecurity funding
New infrastructure announcements: heavy focus on roads, rail & homes
Net migration and population growth expected to pause until 2023
Budget balance and debt: smaller deficits, bigger debt, stable debt burden
Economic forecasts: excellent recovery to date, but outlook remains fragile
This Budget confirms that international travel into Australia will remain heavily restricted until mid-2022. This will continue to hamper the recovery of particular industries and so they are being supported with various targeted temporary measures for:
For individuals who are directly affected by COVID-19 and unable to work, $7.9 million will be available in 2021-22 for an extension to the 'pandemic leave disaster payment' for Australian residents.
The instant write-off (full expensing) of eligible capital equipment introduced in the 2020-21 Budget was extended for another year to 30 June 2023. This extension was sought by Ai Group so that plant and equipment that would take longer to install or that was delayed by disruptions to the importation of capital equipment or by the unavailability of specialist technicians from abroad could qualify for the regime. The measure is available to businesses with aggregated annual turnover or total income of less than $5 billion.
The temporary loss carry-back arrangements introduced in last year’s Budget was also extended for another year to 30 June 2023. The extension will allow companies to utilise losses in the 2022-23 year to offset previously taxed profits in the 2018-19 or subsequent years. The measure is available to companies with an aggregated turnover of less than $5 billion.
The Government is introducing a patent box tax regime under which corporate income derived from Australian owned and developed patents will be taxed at a concessional rate of 17 per cent. The measured is intended to be first available in the 2022-23 year. The regime will initially be confined to the medical and biotechnology industries.
The taxation of employee share schemes will be modified by removing the requirement that tax be assessed at the point of cessation of employment. The objective is to remove a barrier to employment of key personnel. The measures will apply for the first income year after the legislation is enacted.
No changes were announced to the legislated timetable for increasing the superannuation guarantee to 12 per cent. The superannuation guarantee will increase by 0.5 percentage points to 10% from 1 July 2021 and in further increments of 0.5 percentage points in subsequent years.
The budget did however, remove the minimum pay threshold of $450 per month for super payments. An estimated 300,000 individuals on very low incomes will be paid small super contributions by their employees from 1 July 2022. Government will hold consultations with affected businesses to determine the detail of these payments.
Despite the heavy restrictions on international travel, this budget includes a number of tax changes aimed at attracting individuals and companies to set up in Australia. Key changes include:
The Low and Middle Income Tax Offset (LMITO) has been extended for another year. This is an offset against tax payable by low and middle-income earners. It is calculated automatically by the Tax Office when taxpayers lodge their tax returns. This year's extension of the LIMTO will make it available in respect of income earned in the 2021-22 year. Taxpayers will receive the offset when their income tax return for the 2021-22 year is filed in the months from July 2022.
The remaining tranche of the legislated changes to personal income tax rates and brackets is scheduled to take effect from 1 July 2024.
The Budget extends the JobTrainer program for another 12 months.
JobTrainer was established by the federal government in partnership with state-based TAFEs in 2020 to provide affordable courses to help young people develop skills needed in the workforce.
The full list of courses that are free depend on the state's TAFE system. To be eligible, students must either be aged between 17 to 24, be receiving welfare, be unemployed or be expected to become unemployed. The second function of JobTrainer is to give employers a 50% wage subsidy of up to $28,000 per year, if they hire a young person.
The Government is spending an additional $2.7 billion to extend the Boosting Apprenticeship Commencements program.
The demand-driven program is expected to support more than 170,000 new apprentices and trainees by paying businesses a 50 per cent wage subsidy over 12 months for newly commencing apprentices or trainees signed up by 31 March 2022. The subsidy will be capped at $7,000 per quarter per apprentice or trainee. The extension will deliver on the Government’s commitment to building a pipeline of skilled workers by further supporting growing businesses to take on new apprentices and trainees.
This Government is also delivering pathway services for 5,000 women to commence in a non-traditional apprenticeship.
A further $481.2 million is invested in the Transition to Work employment service to assist young Australians secure employment. This specialist youth employment service helps unemployed Australians aged 15-24 move into work or education and since 2016 has provided assistance to over 145,000 young Australians.
The Government is investing $7.6 million in extending the National Careers Institute to ensure that young people are better connected with further education, training and work options and help job seekers match their skills to priority jobs.
The Government is investing $213.5 million to extend and expand the Local Jobs Program to all 51 employment regions across Australia. This program brings together expertise, resources and access to funding at a local level to help job seekers connect to employment, reskilling and upskilling opportunities. It has already commenced across 20 regions that are experiencing especially high numbers of unemployed jobseekers. 5 of these regions are in Victoria, centred on Melbourne.
The Government will provide $285.0 million over five years from 2020‑21 (and $74.2 million per year ongoing) as part of the Commonwealth's commitment to provide stronger support for skills reform and ensure governments, employers and students invest in the training that delivers the best student outcomes to strengthen Australia's skills base.
Funding includes:
1. $149.2 million over four years from 2021‑22 to establish up to 15 industry owned Skills Enterprises to deliver improved skills and workforce outcomes through collaboration with industry and to ensure that the Vocational Education and Training (VET) system is responsive to industry and employer skills needs.
2. $69.1 million over five years from 2020‑21 to establish a new VET National Data Asset by leveraging the existing capability of the Australian Bureau of Statistics’ Multi‑Agency Data Integration Project to measure VET outcomes at the provider and course levels.
3. $30.9 million over four years from 2021‑22 to redesign and rebuild the National Training Register to provide greater transparency of training packages, and improved information about work placements and assessment.
4. $23.6 million over four years from 2021‑22 to support foundation skills, by uncapping the Skills for Education and Employment program, increasing project funding to accelerate the inclusion of digital skills training for job seekers in the program, providing additional funding for foundation skills policy development, and leveraging the Reading Writing Hotline to promote the Foundation Skills Guarantee.
5. $12.1 million over four years from 2021‑22 to simplify Australian apprenticeship pathways information, and to develop a single national digital apprenticeship portal.
The Government’s Digital Economy Strategy commits $1.2 billion over six years from 2021-22 to enhance government and business digitalisation, with much of this spending directed toward digital skills for businesses and individuals.
Key elements of the Digital Economy Strategy for skills include:
Other aspects of The Digital Economy Strategy are aimed at improving business and community access to digital services and the safety and security of those services. These include:
These measures build on and complement previous Budget announcements, including the $800m JobMaker Plan – Digital Business Plan, $1.7 billion investment in the 2020 Cyber Security Strategy, and $4.5 billion NBN investment plan.
Should regulatory reforms arise from the Digital Economy Strategy, these reforms will need to be properly consulted with stakeholders and we would welcome working through with Government on these.
Childcare: The Federal Government will dedicate $1.7 billion to childcare services aimed at helping 400,000 families – particularly low- and middle-income families – save on childcare costs and work an extra day or two.
Beginning on 1 July 2022, the Government will:
The Government estimates the changes will add up to 300,000 hours of work per week which would allow the equivalent of around 40,000 individuals to work an extra day per week and boost the level of GDP by up to $1.5 billion per year.
NDIS: The announced improvements to the NDIS are welcome steps. The budget provides an additional $13.2 billion over four years for the NDIS. In total, funding for the NDIS is expected to grow to $122 billion over the next four years with contributions from the Commonwealth and states and territories.
Aged care: In response to the Royal Commission into Aged Care Quality and Safety, the Government is investing $17.7 billion over five years into aged care. There is a clear need to improve the quality of aged care in Australia. The Government is providing $7.8 billion to improve the quality, safety and sustainability of residential aged care services and will invest $6.5 billion to provide an additional 80,000 Home Care Packages.
Mental health: There is growing recognition of the importance of mental health in workplaces and of the contribution that work can make to restoring and maintaining mental health. The budget provides for an extra $2.3 billion towards mental health services. This funding will go towards:
There will be increased spending on defence industries over the forward estimates but these changes were already announced. The increase in spending from 2020-21 to 2024-25 reflects the increased investment required to deliver the plans set out in the 2016 Defence White Paper and the 2020 Force Structure Plan. Australia's sovereign defence industry, including through its defence capability investments are valued at $270 billion over the next decade.
Additional measures announced in the Budget include a $747 million to upgrade Northern Territory military bases. The package includes upgrading four key training areas and ranges in the Northern Territory to help the Australian Defence Force be "battle ready".
Recognising increasing difficulties facing purchasers of cyclone and flood insurance in a changing climate, the Government will establish a reinsurance pool for Northern Australia backed by a $10 billion guarantee; and explore a comparable arrangement for the whole of Australia.
$1.2 billion over ten years for a co-investment facility outside the Australian Renewable Energy Agency to support a range of broader emissions reduction technologies including 'hydrogen hubs', carbon capture projects and international cooperation on low emissions technology and carbon offsetting.
$279.9 million over ten years to set up a scheme to purchase and encourage emissions reductions below baseline from large industrial facilities with 100,000 tonnes or more of annual direct emissions.
A range of smaller measures:
With respect to waste and circular economy, existing recycling programs will be extended:
The Budget include a $134.6 million deregulation package to reduce compliance costs and streamline the regulatory burden. This package will deliver an estimated $430 million annually in reduced compliance costs The package includes three themes:
1. Reducing the regulatory burden for businesses interacting with government, including:
2. Making it easier for businesses to get people into jobs:
3. Workplace sexual harassment
The Government will provide $15.3 million to implement its response to the Respect@Work Report prepared by the Sex Discrimination Commissioner. Relevant to employers will be the: $7.3 million will support the Respect@Work Council and its work in implementing a range of practical measures to address workplace sexual harassment; $1.7 million for Comcare to deliver training on sexual harassment to WHS inspectors and employer and managers covered by Commonwealth WHS laws and ongoing funding for the Respect@Work website to house free, practical information and education resources for employers and workers.
4. Other regulatory measures
More details can be found here.
The budget provides for $371 million in funding for Biosecurity. The package comes after a $888 million investment in biosecurity and export services in 2020-21 and includes:
The Government is committing an additional $15.2 billion to its 10‑year infrastructure pipeline. Specific projects highlighted for this year’s budget expenditure (in 2021-22) include:
|
STATE |
NEW FUNDING |
KEY PROJECTS |
Construction JOBS SUPPORTED |
|
NSW |
$3.8b |
|
More than 6,500 |
|
VIC |
$3.4b |
|
More than 3,000 |
|
QLD |
$2.0b |
|
More than 2,800 |
|
WA |
$1.6b |
|
More than 4,000 direct and indirect jobs |
|
SA |
$3.4b |
|
More than 5,000 |
|
TAS |
$377.2m |
|
More than 1,000 |
|
NT |
$323.9m |
|
More than 900 |
|
ACT |
$167.3m |
|
Around 200 |
New South Wales new projects and additional funding for existing projects can be found here.
Victorian new projects and additional funding for existing projects can be found here.
Queensland new projects and additional funding for existing projects can be found here.
South Australian new projects and additional funding for existing projects can be found here.
West Australian new projects and additional funding for existing projects can be found here.
Tasmanian new projects and additional funding for existing projects can be found here.
A.C.T. new projects and additional funding for existing projects can be found here.
N.T. new projects and additional funding for existing projects can be found here.
For information on infrastructure projects in your area click here.
In addition to the large infrastructure projects, the Government has announced additional measures that the Government says will boost residential construction.
As part of the 2021-22 Budget, the Government will:
The Government is also providing an additional $124.7 million in funding which will allow the states and territories to bolster public housing stocks, or to meet their social and community housing responsibilities under the 2011 Fair Work decision on Social and Community Services wages.
This Budget assumes that Australia's international borders will remain heavily restricted until at least the middle of 2022. For 2021-22, the total cap on permanent migration will remain at 160,000, but with international travel remaining restricted until at least mid-2022, this year's quota will be primarily filled from temporary visa holders already residing inside Australia.
No significant changes to migration visa categories or conditions were announced in this budget. Within the skilled migration visa stream however, individuals or businesses moving to Australia will now have access to the 'Global Talent Visa' that was introduced earlier this year.
In total, net overseas migration is forecast to fall from around +194,000 persons in 2019-20 to around -97,000 persons by the end of 2020-21 (that is 97,000 more people leaving Australia than arriving), and then to -77,000 in 2021-22 before increasing to 235,000 persons in 2024-25.
This fall in net migration will result in population growth of just 0.1 per cent in 2020-21, rising to just 0.2 per cent in 2021-22 and 0.8 per cent in 2022-23. This will weigh on real GDP growth and potential growth for an extended period.
This budget confirms that government income from taxation and other sources is higher than had been expected in last year's (much delayed) budget and expenditure is lower. This is due to a better economic recovery than had been anticipated and significantly higher prices for iron ore and other export commodities. As a result, the Government's operating deficits are smaller than had previously been forecast for 2021-22 and subsequent years. The fiscal benefits (and risks) of high iron ore prices are pronounced, with Treasury sensitivity analysis indicating that:
"If the iron ore price was to fall immediately to US$55 per tonne FOB, rather than by the end of the March quarter of 2022 as assumed, nominal GDP could be around $11.6 billion lower than forecast in 2020-21 and $38.1 billion lower in 2021-22. This would result in a decrease in tax receipts of around $600 million in 2020-21, $8.3 billion in 2021-22 and, reflecting the timing of company tax collections, around $3.5 billion in 2022-23."
This budget indicates the Government's general operating deficit will not move back into balance or surplus during the outlook period. Unusually, no timetable or notional target date is provided to do so. As outlined in the Treasurer’s (multiple) speeches this week, the ongoing pandemic and its economic consequences have seen the government shift its national economic policy focus from fiscal balance to economic growth and especially jobs growth. A clearly stated target of reducing unemployment is now taking precedence over reducing the deficit and debt.
With operating deficits forecast to continue over the outlook period, net debt will continue to rise. For the general government sector, net debt will rise from $729 bn in and 34.2% of GDP 2021-22 (already the largest on record, in nominal terms) to an estimated $980 bn and 40.9% of GDP by 2024-25. Record low interest rates however, are keeping a lid on the cost of servicing this debt, with net interest payments forecast to stay at 0.7% of GDP despite the significant rise in net debt. Net interest payments for the Australian Government have hovered around 0.7% of GDP since 2013-14 and remain well below the peaks in debt servicing following the 1990s recession, when net interest payments for the Australian government hit a peak of 1.7% of GDP in 1995-96 and 1996-97 on a net debt worth 18.2% of GDP.
Please see our blog for more information about federal government debt trends and projections.
Australia's economy has recovered relatively quickly from the recession of 2020, thus far. Employment has recovered especially well in 2020-21 to date, with the latest employee payroll data (published by the ABS and derived from ATO employee taxation records) indicating that even after the end of the Jobkeeper program in March 2020, employment has kept growing through April. The Government remains keenly focussed on promoting jobs growth and reducing unemployment further from here, with a national unemployment rate under 5.5% by 2022 and less than 5% expected to be achieved by the middle of 2023.
The rapidly tightening labour market is reflected in widespread reports of skill shortages across a wide range of industries, occupations and locations. This is already resulting in pockets of wage pressure for specialist and highly skilled occupations, or outright shortages in occupations and locations that previously utilised skilled migration programs. Both Treasury and the RBA do not expect this tightening to result in significant upward pressure on general wages and inflation however, due to a combination of weak background inflation, weak productivity growth and high levels of underemployment. Treasury expects inflation and wages to remain under 2% p.a. in 2021-22 and rise to 2.25% in 2022-23.
The all-important business investment recovery is proceeding slowly and cautiously, as more activity restrictions are lifted around Australia. Business conditions and confidence recovered strongly in early 2021 (as indicated by Ai group’s monthly performance of industry indexes and other high-frequency business data), but investment intentions are still modest.
Lifting business investment is a key requirement to achieving stronger growth in output, productivity and incomes over the longer term. The Government has sought to address this deficiency by extending the instant asset write-off provisions for a further year. Business investment has already lifted in response to this taxation measure and so the Government has high hopes of a strong take-up for this tax provision over the coming year. Indeed, Treasury expects national spending on facilities, premises, buildings, equipment and machinery by non-mining businesses to surge by 12.5% in 2022-23, which will help to make up for the significant falls in non-mining business investment in both 2019-20 and 2020-21.
From here, the outlook is positive, but significant risks from the COVID-19 pandemic remain. Key risks highlighted for the Australian community and economy include:
Budget shifts gear to the longer term
(Media Release, 11 May)
Federal Budget 2021-22:
Key Measures for business
(Webinar, 13 May)
Federal Budget: Industry aspirations and expectations for 2021-22 Budget
(Media Release, 6 May)
Ai Group Federal Budget submission –
Lift long-term economic capacity and dynamism to address risks
(Media Release, 8 February)
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