It’s been a busy weekend for the Morrison government as it prepares to unveil the 2020-21 federal budget tomorrow, with a bevy of pre-budget announcements hitting the pavement already.
In what is shaping up to be a policy package that balances spending for specific industries and tax cuts with supply side reforms, we learned last week that public servants will be asked to partner with the private sector in new ways and pursue a broad-based deregulation agenda.
Over the weekend, Prime Minister Scott Morrison added to the list of pre-budget measures, unveiling a $1.2 billion wage incentive program for apprentices and trainees that will see the Commonwealth subsidise 50% of pay packets for up to a cap of 10,000 places and $7,000 for each business per quarter.
Treasurer Josh Frydenberg also took to the airwaves to talk up an extension of the First Home Buyer grant scheme on Saturday, with an additional 10,000 places provisioned in a 33% increase in the size of the program.
— Josh Frydenberg (@JoshFrydenberg) October 4, 2020
It came as news.com.au reported Frydenberg is planning to backdate personal income tax cuts in the budget, a plan that would allow the Australian Taxation Office (ATO) to update rates midway through the current financial year.
The government legislated three stages of income tax cuts last year and the first stage has already come into effect, while the other two were due to be implemented in 2022 and 2024; respectively.
Under the new plan, this second stage — which lifts the income threshold for the 19% tax bracket from $41,000 to $45,000 and increases the top threshold for the 32.5% bracket from $90,000 to $120,000 — would be backdated to July 1 this year.
The government is also considering bringing forward a third stage of cuts, which removes the 37% tax rate and applies a flat 30% rate on income between $45,000 and $200,000, currently due to come into effect in 2024.
Both stages were forecast to be worth about $143 billion to the budget over the forward estimates last year, but that figure has likely changed given the economic impact of the COVID-19 pandemic.
The announcements are continuing today, as Deputy Prime Minister Michael McCormack prepares to unveil a fast-tracking of about $7 billion in road and rail projects.
With $750 million for Queensland’s Coomera Connector project and $560 million for Singleton bypass in NSW, the government appears to be focusing on enabling existing infrastructure plans.
What we learned last week: round-up
In addition to announcements in recent days, there were a range of commitments made last week.
The government has pledged $1.5 billion to invest in key manufacturing industries over the next four years under a plan that will include co-design with government departments.
There will also be a range of deregulation initiatives, particularly for small businesses, which will benefit from Fringe Benefit Tax exemptions for retraining or reskilling workers, and tax concessions that will occur over three stages.
From July 1, eligible businesses will be able to deduct startup expenses from their taxes, while from April, 2021, SMEs will be exempt from the 47% fringe benefits tax on car parking and other employee-related expenses.