On the evening of 6 October, Federal Treasurer Josh Frydenberg MP handed down the 2020-21 Federal Budget following what has been the most difficult year for the Australian businesses since the Second World War.

Among the announcements were tax cuts for workers, wage subsidies for apprentices and trainees, along with a $4 billion JobMaker scheme designed to support workers between the age of 16 and 35 – all of which will help the local economy recover from what has been dubbed the ‘COVID-19 recession’.

Another major initiative to support Victorian businesses will be the expansion of the Instant Asset Write Off scheme, allowing 99 per cent of businesses to write off the full value of any new eligible asset.

<iframe width="560" height="315" src="https://www.youtube.com/embed/EytBgucDSnc" title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe>

The Victorian Chamber of Commerce and Industry (VCCI) is proud to have fought for Victorian businesses to get the support they need, and welcomes the initiatives from the Morrison Government that members have called for, including:

• Reinstating $2 billion to the Research and Development Tax Incentive Scheme
• A 50 per cent subsidy for businesses employing apprentices and trainees
• Support for regional Australia to recover from the impacts of COVID-19 and recent natural disasters
• Support for small businesses to embrace digital solutions to grow their business
• $1 billion for new research funding for our universities
• Support for Australian exporters to continue to access global supply chains
• The introduction of loss-carry back provisions which means businesses can claim refunds for tax paid on pre-COVID-19 profits

VCCI Chief Executive Paul Guerra commended the 2020-21 Federal Budget and the Federal Treasurer, “this is a budget that delivers for local businesses, the ambitious entrepreneurs who have steadfastly stayed the course, ready to resume when permitted to grow Victorian jobs once again.”

“We outlined three key objectives that we wanted to see in the Budget: protecting and growing local business, cementing and improving our global reputation and the next big infrastructure build and we’re pleased to see that the Morrison Government has taken up our recommendations.”

While the VCCI and the Victorian business community are pleased with the Federal Budget, pressure is now on the Andrews Government to match the Federal spending at the Victorian State Budget, due in November.

“The strong focus on encouraging a business-led recovery in the Federal Budget must be mirrored in next month’s State Budget, which provides a timely opportunity to lower business costs, cut red tape, encourage investment and innovation and generate jobs,” said Mr Guerra.

Download the VCCI's full Budget Breakdown

The Treasurer’s address

In his address to Parliament on Tuesday night, Federal Treasurer Josh Frydenberg praised “the invisible strength of Australia” and the strength of businesses who had been hit by fires, floods and a global pandemic all in one year.

The Treasurer emphatically praised the strength of the Australian economy despite growing debt levels and unemployment.

“Net debt will increase to $703 billion or 36 per cent of GDP this year and peak at $966 billion or 44 per cent of GDP in June 2024... By comparison, Australia’s net debt as a share of the economy will peak at half of that in the United Kingdom, around a third of that in the United States and around a quarter of that in Japan today.”

Mr Frydenberg made it abundantly clear that despite all the turmoil Australians have endured throughout 2020, our mettle and strength, along with the backing of the Morrison Government will see us through.

“This year, Australia’s circumstances have changed dramatically. But Australians have not.”

“Across this country, people are digging deep, banding together, and getting on with it. The road to recovery will be hard - but there is hope. The Morrison Government’s message to Australians is that we have your back.”

JobMaker

Throughout the course of 2020, the Morrison Government introduced JobKeeper, JobSeeker and JobTrainer to support Australians during the COVID-19 pandemic. To support young workers and their employers, the Morrison Government has now introduced JobMaker.

Targeted at those aged between 16 and 35, the federal government will provide a hiring credit of $200 per week for those aged under 30, and $100 per week for those aged between 30 and 35. Mr Frydenberg announced in his address that this is expected to support approximately 450,000 jobs for young people.

On the condition that each worker must partake in at least 20 hours of work per week, all businesses other than the major banks will be eligible for the hiring credit.

The $4 billion program will come into effect for employers immediately and will apply to every eligible employee they hire in the next 12 months.

“Having a job means more than earning an income. It means economic security. It means independence. It means opportunity,” said Mr Frydenberg.

Rebuilding Australia

The COVID-19 pandemic has struck the economy like no other recent global event, turning our world and economy upside-down overnight. With rolling daily average case numbers continuing to decline in Victoria, we can now begin to creatively adapt and invest in our new future and build our recovery.

In order to build a COVID-normal world, research and development will be crucial in order to find creative new ways of working, improving supply chains and bolstering future technologies. It’s for these reasons, the VCCI has fought for the reinstatement of the taxation cuts to the Research and Development Tax Incentive Scheme to advance our local manufacturing.

A recent survey by Essential Research confirms what VCCI members are saying, with 78 per cent of people believing “the pandemic has exposed flaws in the economy and there is an opportunity to explore new ways to run the economy”. Additionally, 69 per cent of survey respondents also agree that “the government should directly invest in the economy by creating projects and jobs”.

Business expenditure on research and development (BERD) will play a pivotal role in Australia’s resurgence and out of recession and will present the opportunity for businesses to invest in each other and build new supply chains.

<script id="infogram_0_dd191de1-f5b6-493f-8117-8c0d1689c2f1" title="BERD in Australia" src="https://e.infogram.com/js/dist/embed.js?VL5" type="text/javascript"></script><div style="padding:8px 0;font-family:Arial!important;font-size:13px!important;line-height:15px!important;text-align:center;border-top:1px solid #dadada;margin:0 30px"><a href="https://infogram.com/dd191de1-f5b6-493f-8117-8c0d1689c2f1" style="color:#989898!important;text-decoration:none!important;" target="_blank">BERD in Australia</a><br><a href="https://infogram.com" style="color:#989898!important;text-decoration:none!important;" target="_blank" rel="nofollow">Infogram</a></div>

Now is the time to back Australian businesses, support our workers and invest in local manufacturing. The Morrison Government’s $1.5 billion Modern Manufacturing Initiative (MMI) will provide co-funding for large manufacturing projects to help businesses in the following six National Manufacturing Priority areas to scale-up, collaborate and commercialise:

• Resources technology and critical minerals processing
• Food and beverage manufacturing
• Medical products
• Clean energy and recycling
• Defence industry
• The space industry

This $1.5 billion investment from the Federal Government, coupled with the $1.2 billion apprentice and trainee wage subsidy will go a long way to supporting local business and investing in our state’s future.

The VCCI estimates that commencements of apprenticeships and traineeships have fallen by approximately 45 per cent across Victoria during the pandemic (since March 2020). Without dedicated support this trend would have continued, leading to dire consequences for school leavers and the future pipeline of skilled workers. A boost in commencements will be critical to Victoria’s economic recovery.

Support for business

Along with the announced MMI and support for apprentices and trainees, business of all sizes will have more breathing room in their balance sheets thanks to a series of taxation cuts and incentives.

Mr Frydenberg also announced what he praises as a “game changer” for the private sector and “the engine of the Australian economy”.

Citing that eight out of every ten jobs in Australia are in the private sector, the Treasurer presented the “largest set of investment incentives any Australian Government has ever provided.”

Expanding the Instant Asset Write Off scheme during the COVID crisis, all small, medium and large businesses with a turnover of up to $5 billion will be able to write off the full value of any eligible asset they purchase for their business until June of 2022.

Among the new tax concessions for businesses include the introduction of a loss carry-back provision, which will allow a business that has paid tax on profits in previous years, claim back a refund to offset a loss. This new strategy will provide a vital cash flow to businesses that would have been profitable if not for COVID restrictions.

As announced on 24 September by Federal Treasurer Josh Frydenberg, the Morrison Government has undergone a major rewrite of insolvency laws which will spare small businesses from expensive voluntary administration processes from which many do not recover.

Under the new structure, based on the United States’ Chapter 11 bankruptcy process, small businesses with a total debt of less than $1 million owing to creditors will be able to retain control of their business and plan their recovery independently without being handed over to administrators.

In a resounding effort to prepare Australian businesses for the new digital-world economy, an $800 million package has also been established to support businesses transitioning to digital technologies.

Personal tax cuts

While thousands of businesses will benefit from the Government’s Federal Budget, workers be able to put more money in the bank thanks to an earlier-than-expected tax cut.

The Federal Budget includes plans to fast-track the Stage 2 tax cuts which were originally scheduled to be introduced in mid-2022 as part of a seven-year tax reform.

The Stage 2 tax cuts will lift the 19 per cent threshold from $37,000 to $45,000, and lift the 32.5 per cent threshold from $90,000 to $120,000. For the tax cuts to come into effect, it will have to be passed through the Senate and approved by the opposition for the legislation to be passed.

Ultimately, workers will see the lower tax rates take effect on their pay packets by the middle of this month if the Senate is able to approve the bill quickly.

Support for regional Victoria

Creating jobs across Australia in all regions and sectors has clearly been at the forefront of the government’s agenda in planning the 2020-21 federal budget.

To support regional Victoria, $553 million over four years will be provided to support regional Australia to recover from the impacts of COVID-19 and recent natural disasters, build resilience to future economic shocks and support long term economic growth.

This includes $207.7 million over five years for round five of the Building Better Regions Fund to support investment in community infrastructure and capacity building projects in regional areas, including $100.0 million for tourism-related infrastructure projects.

Advocacy and campaigns

For more information on the Victorian Chamber’s advocacy work and current campaigns, along with submissions and taskforces, visit the Policy and Advocacy section of the VCCI website.

If you have any questions or would like to be involved in our advocacy work, please contact policy@victorianchamber.com.au.