The government went big on the 2021 budget, with packaging businesses among those set to benefit from the treasurer’s $75bn recovery strategy.
In a major boost for packaging businesses, treasurer Josh Frydenberg extended the temporary instant asset write-off, and the loss carry-back, for another two years, at a cost of $20.7bn for the two schemes. It also boosted its apprentice training support, which pays business half their wages.
A new expense was added as businesses will now have to pay super for all low income part-time employees, but tax on staff shares was axed, and the amount that could be given in shares to staff dramatically increased.
The treasurer also increased the power of SMEs to pause or modify action taken against them by the Australian Taxation Office (ATO), including giving the Administrative Appeal Tribunal the ability to defer any payment demanded by the ATO until the matter has been finally resolved.
Giving the 2021 budget an overall thumbs up, Mark Dingley, CEO of Matthews Australia, and Australian Packaging & Processing Machinery Association (APPMA) chairman, said, “The strategy of returning the budget to a position of long term fiscal sustainability based on the growth of the economy, higher levels of employment, with a more skilled and productive workforce, is encouraging.”
The instant asset write-off, or temporary full expensing, enables business to depreciate the full cost of assets bought in the current tax year, rather than writing them off over several years. For instance, it means packaging businesses investing at AUSPACK next May can write off the full cost of that investment in the 2021/22 accounts.
The scheme will now run until 2023. It includes assets such as software, technology, vehicles, plant and equipment.
The loss carry-back rule means a business that made a loss as a result of Covid can carry back those losses against previous years, back to 2018/19, when they were in profit. The caveat is that the amount carried back cannot be greater than earlier taxed profits. It runs until the 2022/23 tax year.
The loss carry-back is aimed to support business cashflow, particularly for those companies that had been making profits and paying tax on them, but fell into loss due to Covid.
The new super rule for part-time employees means that whereas before business did not have to pay super for staff earning less than $450 a month, now they do from $200 a month, at the standard rate. And the government is going ahead with its schedule to raise employer super contributions to 12 per cent of wages.
The government is also pumping an extra $2.7bn into extending its Boosting Apprenticeship Commencements programme. It will pay businesses a 50 per cent wage subsidy over 12 months for newly commencing apprentices or trainees signed up by 31 March next year, capped at $7000 per quarter, per apprentice or trainee. However, there is no new funding for TAFEs.
Announcing its extension to Parliament, Frydenberg talked up the success of the instant asset write-off, saying the extension, “would allow tradies to buy new utes, manufacturers to expand production lines and farmers to replace harvesters”.
He said, “Our record investment incentives are filling the order books of the nation. Over 99 per cent of businesses, employing 11 million workers, can write off the full value of any eligible asset they purchase.
“This has seen their spending on machinery and equipment increase at the fastest rate in nearly seven years.”
Many staff will be better off under the new budget, with Frydenberg extending the tax offset of up to $1080 for people earning less than $90,000, or $2160 for couples, to 2023.
The treasurer also incentivised staff to take ownership in the company they work for, cancelling taxation on shares they own in a company which is paid when they leave it, and enabling employers to issue $30,000 worth of shares per employee per year, up from the present $5000.
There was, however, little in the budget on climate change, recycling or the circular economy.
The budget assumes that international travel will not resume in any meaningful way at least for another 12 months, although the postponed Labelexpo is due to take place in 12 months’ time in Brussels, so the nation’s label printers will be hopeful they will be able to make the trip.
Packaging supply chain: Budget boost for investment in modernisation
APMMA chairman Mark Dingley told PKN: “We have already seen the spending on machinery and equipment increase at the fastest rate in nearly seven years, as reported in last night’s budget. The extension to the temporary full expensing measure on eligible assets to June 2023 will allow manufacturers to continue to invest in modernisation and expansion of production lines, to meet the changing needs of Australian consumers bought on by Covid. This will benefit the wider packaging industry, and in particular our APPMA members that are crucial suppliers to Australian manufacturers.”
According to Dingley the treasurer appeared to be on the right track to pivot Australia away from its dependence on commodities. He said, “We cannot simply sit back and expect high commodity prices to continue. In particular, the dependance of iron ore to support the Australian economy in the future. We need to build a more resilient and enduring economy and the initiatives announced last night, as well as in the previous budget, continue to support businesses and the investment in local manufacturing to support growth, employment, and provide a more diverse and sustainable economy well into the future.”