The Federal Government's Economic and Fiscal Update (Update) 2020-21, announced yesterday, presents a concise image of the challenges the Australian economy will face as it emerges from the COVID-19 pandemic in the short to medium term. We summarise what the latest Update means for businesses.
The Federal Budget update focused on Australia's economic position and the impact of the Government's response to COVID-19 and the 2019 – 20 Bushfires.
Though no new measures were specifically announced, there were some additional items for certain existing programmes.
With these figures in mind and the COVID-19 pandemic remaining omnipresent for the foreseeable future, it might have been expected that several significant new measures would be announced in addition to the pre-announced and centrepiece JobKeeper Extension and already existing measures.
On 21 July 2020 the Government announced that it will be extending the JobKeeper scheme until 28 March 2021, but with reduced payments.
The extension of the JobKeeper scheme beyond 27 September 2020 is expected to require legislative amendments once parliament resumes from 24 August 2020.
The Update did not include any changes to existing insolvency laws nor any extensions to the changes from March and April earlier this year. We may yet see extensions to both the 'Safe Harbour' policy which removes directors' personal liability for insolvent trading and the temporary softening of statutory demands.
Both of these policies are due to sunset in September and we wait to see what the Federal Government's position will be on any possible extension of these rules.
The Government has provided some detail about the operation of COVID-related policy intended to support the flow of credit. An exemption from responsible lending obligations designed to ensure small businesses' access to credit remains in effect.
Under the Coronavirus Small and Medium Enterprise (SME) Guarantee Scheme, more than 15,600 SMEs have accessed loans totalling $1.5 billion. This scheme will be extended until 30 June 2021, and will be amended to better suit the needs of SMEs.
Action undertaken by the Reserve Bank of Australia has reduced funding costs and made $90 billion available for loans to businesses, with incentives to lend to SMEs.
Direct cash flow support to SMEs and non-profits have resulted in over 750,000 entities receiving over $16 billion in cash payments intended to help businesses cover their fixed costs.
The Government has not announced any amendments to its existing, temporary modifications to the Corporations Act 2001 (Cth). For example:
No changes to personal or corporate taxation legislation or rates were included in the Update. It would appear, at least with respect to personal income tax, that there may be measures announced in the upcoming Federal Budget in October.
The Federal Government has not announced any amendments to its existing programmes announced earlier this year including variously:
In that regard, clients should continue to monitor developments with other existing programmes, particularly in the lead up to the Federal Budget, now scheduled for 6 October 2020.