$4 billion dollar stimulus spend and a focus to create and save jobs

On Tuesday 10 November, the Treasurer of South Australia, Rob Lucas, handed down the 2020-21 SA State Budget.  As expected, the focus of the budget is targeted spending to create and save jobs.  There has been a record spend announced on infrastructure of $16.7 billion along with a $4 billion stimulus spend.  Spending in health, SA Police, education and training, tourism and hospitality and responses to COVID-19 and the bushfire recovery has also been announced.

The budget deficit for last year was $1.49 billion. This year it will increase to $2.59 billion and $1.42 billion next year.  The State Government is hoping to get back to into surplus in 2023-24 financial year.  However, even though the debt will increase significantly, interest costs will be less than previous estimates due to record low interest rates.

For South Australian businesses, announcements were made with regards to payroll tax, Small Business Grants and land tax relief.

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Since the Australian economy was hit by the impact of Covid-19 in March, relief for businesses has been provided in many different forms, not just the JobKeeper program.

This relief included specific state based measures in the way of payroll tax waivers and deferrals, land tax relief and cash grants (now closed).  The Federal government also announced other relief measures including temporary changes to insolvency laws and the National Cabinet Mandatory Code of Conduct – SME Commercial Leasing Principles During COVID-19.

The timing and expiration of many of these measures were linked to the timing of the JobKeeper program.  Once JobKeeper was extended, many of these relief measures were also extended but not in a uniform way.

See below for further detail.

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The message was clear from the Federal Government. They want taxpayers to spend and they want that spending to create jobs.  Underlying that, they are hoping the tax cuts, business investment breaks and cash payments will create the confidence required to bring the spending.

There were a number of measures announced in the Federal Budget – following is a summary of the measures that will impact individuals and businesses.

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The Government handed down the Federal Budget last night which was all about jobs and getting the economy moving again. The key tax related measures are outlined below.

Clarifying the corporate residency test

The Government will make technical amendments to clarify the corporate residency test. The Government will amend the law to provide that a company that is incorporated offshore will be treated as an Australian tax resident if it has a ‘significant economic connection to Australia’. This test will be satisfied where both the company’s core commercial activities are undertaken in Australia and its central management and control is in Australia. The measure will have effect from the first income year after the date of Royal Assent of the enabling legislation.

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If you are currently receiving JobKeeper, you would be aware that the program was due to finish on 27 September 2020 after running for six months.  We now know that the program is being extended to 28 March 2021. However, there will be new eligibility requirements.  The rules governing JobKeeper 2.0 were recently released by the Treasurer and further guidance from the ATO has also been released, with more detail to come.

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