2019 Federal Budget Summary

3 April 2019

2019 Federal Budget Summary

ACT Region-Specific Budget Announcements

  • An additional $50m in priority funding for regional infrastructure in the ACT, consisting of $30m for the Kings Highway corridor, and $20m for the duplication of William Slim Drive, with funding commencing in 2021-22 and the balance paid in 2022-23.
  • The Commonwealth will divest surplus ACT land owned by the Dept. of Finance over two years from 2019-20 – no funding details provided due to commercial-in-confidence.
  • $13.5m to expand intensive care at Canberra Hospital.
  • A net increase of 2,997 full-time equivalent non-military staff in the Australian Public Service, up from 244,306 to 247,302 in 2019-20.
  • Further decentralisation of up to 191 APS staff from Comcare, Indigenous Business Australia, the Australian Financial Security Authority, the Murray Darling Basin Authority, the Department of Infrastructure and the Department of Prime Minister and Cabinet.

Budget Key Features for Business

  • SME instant asset write-off threshold increased from $25,000 to $30,000 from 2 April 2019 to 30 June 2019, and access expanded to businesses with an annual turnover less than $50m, up from $10m (around 3.4m businesses now eligible).
  • SME company tax rate cuts brought forward, dropping from 27.5% to 25% by 2021-22 – five years earlier than Applies to all businesses with an annual turnover less than $50m.
  • $1b in funding to the ATO to target tax avoidance by multinationals, big business and high wealth individuals.
  • $57.5m in funding through to 2022-23 to assist small businesses with tax disputes.
  • Personal income tax cuts/reforms to assist consumption growth:
    • from 1 July 2019, taxes reduced by up to $1,080 for single earners & $2,160 for dual income families earning up to $126,000
    • in 2022-23, the top tax threshold of 19% bracket will rise from $41,000 to $45,000p.a., and the low income tax offset will increase from $645 to $700
    • in 2024-25, the 32.5% tax rate will fall to 30%
  • $525m over five years to improve skills, including 80,000 new apprenticeships in skills shortage areas, with incentive payments to employers increased to up to $8,000; $132.4m to establish a National Skills Commission and a National Careers Institute; $67.5m to trial 10 national training hubs to boost education in regions with high youth unemployment; and $62.4m to boost numeracy, literacy and digital skills.
  • $206m in funding for the Building Better Regions Fund, boosting investment in regional infrastructure.
  • $60m in funding over three years to the Export Market Development Grant Scheme to assist SME exporters.
  • $50m over three years, combined with State/Territory and industry co-payments, to enhance iconic tourism infrastructure.
  • $15m in additional funding for the Drought Communities Program, to assist drought-affected businesses.

Economic Context for Budget

  • Global economic growth strengthened in 2017 and into 2018 reaching 7%, but has moderated since late 2018, and is forecast to be 3.5% from 2019 through to 2021.
  • In Australia, the forecast 3.0% growth rate in 2018-19 and 2019-20 is not likely to be achieved, with growth now expected to reach 2.25% in 2019-20, increasing to 2.75% through to 2021.
  • The unemployment rate remains on track to decline from 5.4% to 5.0% this year, and remain at that level until 2021.
  • Inflation is forecast to increase from 1.5% this year to 2.25% in 2019-20, then 2.5% by 2020-21.
  • Wage growth will be lower than the previous Budget forecast, increasing slightly from 5% in 2018-19 to 2.75% in 2019-20, then accelerating to 3.25% by 2020-21.
  • Low unemployment and rising wages growth should lead to increased household consumption; coupled with robust non-mining business investment growth, a resurgence in mining investment, a lower dollar and the resilience of Australia’s major trading partners, the economic outlook is generally positive despite housing market risks and international trade uncertainty.
  • Accordingly, the underlying cash balance is expected to increase from a deficit of $4.2b this year back to a surplus of $7.1b in 2019-20 and $11.0b in 2021-22, with the longer term goal being to eliminate Commonwealth net debt by 2030.

Comment

Canberra Business Chamber welcomes a Budget that emphasises the fundamental business principles of getting back into the black and investing in growth. With an economy that is largely driven by our small businesses, the 2019-20 Federal Budget provides much-needed assistance in the form of SME-targeted tax measures such as the increased asset write-off, as well as additional funding for exporters, and an increased focus on meeting skills shortages.

At the same time, the Chamber feels that the $58m increase in funding to support small businesses seeking assistance in disputes with the Australian Taxation Office, will be dwarfed by the billion dollar injection to the ATO’s scrutiny of tax avoidance, the burden of which often falls largely upon those least able to bear it: small businesses.

While the Budget provides ACT consumers with some tax relief that in turn should flow on to local businesses, the Territory gets only a tiny slice of the $25 billion in infrastructure spending, with only $50m over two years for road upgrades – important institutions in the Capital, a source of national pride as well as local tourism, miss out on necessary funds. There are also disturbing signs that the Commonwealth will continue its plan to decentralise the Public Service, which, if carried out, will have a significant negative impact on the ACT’s economy.

Canberra Business Chamber will continue to monitor the impacts of these measures, and put forward business concerns to the Federal Government in coming months.

CBC Kindred Organisations:

Master Builders Association

Australian Hotels Association

Chartered Business Accountants

Australian Institute of Company Directors