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2020 ‘mini-budget’: An economic & fiscal update

Written and accurate as at: Aug 12, 2020 Current Stats & Facts

On 23 July 2020, a ‘mini-budget’ was delivered by Treasurer Josh Frydenberg—an economic and fiscal update, detailing the impact of the COVID-19 pandemic and the support provided to individuals, households and businesses.

Please note: Due to the COVID-19 pandemic, the 2020-21 Federal Budget will be delivered on 6 October 2020.

Below, we provide a summary of the update*, inclusive of the announcements made in relation to the COVID-19 early release of super, Coronavirus Supplement and JobSeeker Payment, JobKeeper Payment, and more.

 

COVID-19 health data overview

COVID-19 confirmed cases, deaths and recoveries overview

As it stands, in terms of COVID-19^, globally, there are a reported 20,207,011 cases, 739,898 deaths, and 12,460,381 recoveries. And, nationally, there are a reported 22,127 cases, 352 deaths, and 12,393 recoveries. 

 

Economic and fiscal outlook overview

Major economic parameters overview

 

Australian Government, economic and fiscal update:

Major economic parameters*

 

Outcome

Forecasts

 

2018-19

2019-20

2020-21

Real GDP

2.0%

-¼%

-2 ½%

Employment^

2.5%

-4.4%

1%

Unemployment rate^

5.2%

7.0%

8 ¾%

Consumer price index

1.6%

-¼%

1 ¼%

Wage price index

2.3%

1 ¾%

1 ¼%

Nominal GDP

5.3%

2%

-4 ¾%

*Percentage change on preceding year unless otherwise stated. The consumer price index, employment, and the wage price index are through-the-year growth to the June quarter. The unemployment rate is the rate for the June quarter.

^2019-20 is an outcome.

Source: ABS cat. no. 5206.0, 6202.0, 6345.0, 6401.0 and Treasury.

 

Budget aggregates overview

 

Australian Government, Economic and Fiscal Update:

Budget aggregates

 

Actual

Estimates

 

2018-19

2019-20

2020-21

Underlying cash balance*

-0.7 $b

-85.8 $b

-184.5 $b

   Per cent of GDP

0.0%

-4.3%

-9.7%

Gross debt^

542.0 $b

684.3 $b

851.9 $b

   Per cent of GDP

27.8%

34.4%

45.0%

Net debt#

373.6 $b

488.2 $b

677.1 $b

   Per cent of GDP

19.3%

24.6%

35.7%

*Excludes expected net Future Fund earnings before 2020-21.

^Gross debt measures the face value of Australian Government Securities (AGS) on issue. The 2019-20 number is the actual face value at 30 June 2020.

#Net debt equals the sum of interest bearing liabilities (which includes AGS on issue measured at market value) minus the sum of cash and deposits, advances paid and investments, loans and placements.

 

Economic support overview and update

Total economic support in response to COVID-19 overview

 

Australian Government, Economic and Fiscal Update:

Total economic support in response to COVID-19

COVID-19 Response Package – economic measures*

164.1 $b

Balance sheet support^

125.0 $b

Total

289.1 $b

*For example, JobKeeper Payment, boosting cash flow for employers, Coronavirus Supplement, payments to support households, supporting apprentices and trainees, temporary early access to superannuation, increasing and extending the instant asset write-off, HomeBuilder grant program, and child care.

^For example, Government support for immediate cash flow needs of SMEs and Reserve Bank of Australia – Term Funding Facility.

 

COVID-19 early release of super update

The end date for the second tranche of the temporary condition of release, COVID-19 early release of super, will be extended to 31 December 2020 (previously 24 September 2020).

From 1 July 2020 (until 31 December 2020), eligible individuals will be able to apply to the ATO to access up to $10,000 of their super, tax-free. For more information on the COVID-19 early release of super, please click here.

 

Coronavirus Supplement and JobSeeker Payment update

The Coronavirus Supplement will be extended to 31 December 2020 (previously 24 September 2020). However, the Supplement rate will be adjusted to $250 per fortnight (previously $550 per fortnight).

From 25 September 2020 to 31 December 2020, the Supplement for eligible recipients will be $250 per fortnight. The income support payment recipients eligible to receive the Supplement remain the same.

Also, from 25 September 2020 to 31 December 2020, the income free area for JobSeeker Payment and Youth Allowance (Other) will be increased to $300 per fortnight, and a $0.60 taper will apply for income above this.

Importantly, the Supplement will remain outside the income test, meaning those who are eligible for the relevant income support payment will receive the full rate of the Supplement.

Please note: The existing $106 per fortnight income free area, and $0.40 taper, will continue to apply for the JobSeeker Payment recipients who are principal carer parents.

In addition, in terms of access to income support payments, from 25 September 2020:

  • The liquid assets waiting period and the assets tests will be reinstated.
  • The ordinary waiting period, newly arrived residents waiting period, and seasonal workers preclusion period will continue to be waived until 31 December 2020.
  • The partner income test cut-out will increase to $3,086.11 per fortnight ($80,238.89 per annum), for individuals with no personal income, and a $0.27 taper will apply, until 31 December 2020.

Finally, from 4 August 2020, job seekers will be required to participate in appointments with providers, agree to a Job Plan, undertake up to four job searches per month, and attend activities (if safe to do so). No payment suspensions or financial penalties will be applied for those that don’t meet these requirements. However, a job seeker may have their payment cancelled, and may need to wait for four weeks before they can reapply for income support, if they refuse an offer of suitable employment without a reasonable excuse.

 

JobKeeper Payment update

The JobKeeper Payment, which was due to end 27 September 2020, will be extended (two extension periods).

For businesses and not-for-profits to be eligible for the first extension period of 28 September 2020 to 3 January 2021, they will need to demonstrate that their actual GST turnover (see below) has fallen in the September 2020 quarter relative to a comparable period.

For businesses and not-for-profits to be eligible for the second extension period of 4 January 2021 to 28 March 2021, they will again need to demonstrate that their actual GST turnover (see below) has fallen in the December 2020 quarter relative to a comparable period.

The following reductions in actual GST turnover are required to be met in each extension period:

  • 50% decline in turnover for those with an aggregated turnover of >$1 billion;
  • 30% decline in turnover for those with an aggregated turnover of ≤$1 billion; or
  • 15% decline in turnover for Australian charities and not-for-profit Commission-registered charities (excluding schools and universities).

Please note: The Commissioner of Taxation will have the discretion to set out alternative tests to establish eligibility in specific circumstances. Furthermore, the Payment will continue to remain open to new recipients, provided they meet the existing eligibility requirements and extension period turnover tests.

Lastly, the Payment rate will be reduced and paid at two rates:

  • From 28 September 2020 to 3 January 2021:
    • $1,200 per fortnight for eligible employees who, in the four weeks of pay periods before either 1 March 2020 or 1 July 2020, worked on average ≥20 hours a week, and for eligible business participants who were actively engaged on average ≥20 hours per week; and
    • $750 per fortnight for other eligible employees and business participants.
  • From 4 January 2021 to 28 March 2021:
    • $1,000 per fortnight for all eligible employees who, in the four weeks of pay periods before either 1 March 2020 or 1 July 2020, worked on average ≥20 hours a week, and for eligible business participants who were actively engaged on average ≥20 hours per week; and
    • $650 per fortnight for other eligible employees and business participants.

Please note: The Commissioner of Taxation will have the discretion to set out alternative tests to establish eligibility in specific circumstances. Businesses and not-for-profits will be required to nominate which Payment rate they are claiming for each of their eligible employees (or business participants). Furthermore, the existing eligibility requirements for employees will remain unchanged—however, with effect from 3 August 2020, the reference date for assessing which employees are eligible for the Payment is now 1 July 2020 (previously 1 March 2020).

 

Supporting Apprentices and Trainees wage subsidy update

The Supporting Apprentices and Trainees wage subsidy, which was set to end on 30 September 2020, will be extended until 31 March 2021 and expanded to include more businesses.

From 1 July 2020, the subsidy will be available to small and medium-sized businesses with fewer than 200 employees (an increase from 20 employees), including those using a Group Training Organisation, who retain an apprentice or trainee engaged as at 1 July 2020.

Eligible employers will be able to apply for the subsidy of 50% of an apprentice’s or trainee’s wage paid from 1 July 2020 to 31 March 2021, up to a cap of $7,000 per quarter—with payments made quarterly in arrears.

Please note: Employers of any size, including Group Training Organisations, that re-engage an eligible out-of-trade apprentice or trainee will also be eligible for the subsidy.

 

Coronavirus SME Guarantee Scheme update

The Coronavirus SMS Guarantee Scheme, the Government guaranteeing 50% of new loans issued by eligible participating lenders to eligible small and medium-sized businesses, will be extended and expanded (second phase).

The second phase of the Scheme will start 1 October 2020 and will be available for loans made until 30 June 2021.

From 1 October 2020, eligible participating lenders will be able to offer loans during the second phase on the same terms as the first phase of the Scheme, with the following enhancements:

  • The maximum loan size will be increased from $250,000 to $1 million per borrower.
  • A loan can be either unsecured or secured (excluding commercial or residential property).
  • Loans can be used for a broader range of business purposes, including to support investment in a period of economic recovery.
  • Loans can be up to five years rather than three years, and whether there will be a six-month repayment holiday will be at the lender’s discretion.

 

Moving Forward

To further discuss any of the above, and its relevance to your financial situation, goals and objectives, please contact us. After reading this article, you may also find the following of interest:

*Australian Government. (2020). Economic and Fiscal Update July 2020.

^Center for Systems Science and Engineering (CSSE). GIS Dashboard: Coronavirus COVID-19 Global Cases by Johns Hopkins CSSE.

 

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