Prime Minister Scott Morrison has today announced that the Federal Budget announcement will be delayed until October 6th 2020, amidst the economic uncertainty spawned by the COVID-19 pandemic.
"The idea that you can actually put together any sort of forecast around the economy at this time is simply not sensible,”
"The idea that you can actually put together any sort of forecast around the economy at this time is simply not sensible,” Mr Morrison said in a press conference.
State and territory governments will be following suit by delaying the release of their own budgets.
The Tax Institute Senior Tax Counsel, Bob Deutsch, said that, “As much as it is preferable to maintain certainty where we can to try and offset the uncertainty of these times, we welcome the Government’s move to push the Budget out by five months.
Budget night is traditionally one of the biggest nights in the calendar for tax professionals. Major tax and superannuation law changes are usually announced as part of the Federal Budget. It is a huge statement by the Government to move the Budget out by five months.
We know that members have been waiting for announcements about measures that remain uncertain, for example what further changes might be announced in relation to Division 7A. However, given the circumstances we are in, clearly priorities need to change. There are much more immediate matters to consider, such as the health and well-being of everyone. Everyone is feeling pressure and anxiety from the unknown consequences that are flowing from the Coronavirus crisis.”
Alongside announcements concerning measures like social distancing, Mr Morrison also announced a second stimulus package directed towards small and medium sized businesses, which, “…will cushion the blow over the next six months, and will provide the necessary support so people can get on that bridge, to get them to the other side.”
“That is focusing heavily on small, medium size businesses, sole traders, and it is also providing for the incoming support that will be necessary for those most directly impacted by the economic downturn caused by the coronavirus.”
While it’s yet to be announced exactly what the second stimulus package includes, the first included measures aimed at small business owners and sole traders. They included:
- Increasing the Instant Asset Write-off threshold fivefold, from $30,000 to $150,000 and opening it up to businesses with aggregated annual turnover of less than $500 million (up from $50 million) until 30 June 2020.
- A 15-month investment incentive which accelerates depreciation deductions. It allows businesses with a turnover of less than $500 million to deduct 50% of an eligible asset’s cost on installation. This applies to eligible assets acquired from 12 March 2020 and first used or installed by 30 June 2021.
- The Boosting Cash Flow for Employers measure, which provides up to $25,000 back to business, with a minimum payment of $2,000 for eligible businesses. This tax-free payment is available to eligible small and medium-sized businesses that turn over less than $50 million and employ staff.
- A 50% wage subsidy for apprentice or trainee wages for up to nine months from 1 January 2020 to 30 September 2020, open to eligible employees.
“Clearly, fiscal management of the economy is extremely important at this time. The vehicles the Government is using are the stimulus package that we saw last week and the one to come in the next few days, which in the current circumstances are the right vehicles to be using given they can have a more immediate effect and are unlikely to meet with objection as they pass through the Parliamentary process,” said Bob.
Bob recently discussed these and other measures in a podcast with Tax Talks.
COVID-19 measures passed into law
The new measures to help the economy withstand and recover from the economic impact of COVID-19 (coronavirus) have received Royal Assent and been passed into legislation. Read the full announcement here.
The ATO has updated its website with essential information about the tax and superannuation changes that they will be administering, including:
- Providing cash flow assistance for employers
- Increasing the instant asset write-off, making more businesses eligible
- Backing business investment by accelerating depreciation deductions
- Giving individuals early access to their superannuation
More to come as details are revealed.