RSM Australia

Industries | Federal Budget 2019

How will the federal Budget impact industries



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Agribusiness - Perfect storm clears and the clean up begins.

The Government is providing $6.3 billion in drought assistance and concessional loans for farmers and farming communities.

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Flood-affected farmers in North Queensland will have access to up to $300 million in grants to rebuild farm infrastructure, replace livestock and replant crops.

The instant asset write-off will be welcomed by farmers and small business alike and will encourage investment in individual assets costing up to $30,000.

You will need to ensure the purchase is $29,999 or less exclusive of GST, and the asset must be installed and ready for use prior to 30 June to claim the deduction this year.

There is uncertainty with the upcoming election, but Labor’s initial response indicates that they support this measure.

The FHA extension will ensure that FHA recipients will retain access to income support when net proceeds of forced livestock sales are invested into a Farm Management Deposit (FMD).

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Welcome relief for drought and flood affected farmers with proposed small business tax changes the sweetener.

  • $6.3 billion in drought support and $3.3 billion for flood affected farmers.
  • Instant asset write-off extended to $30,000 from 2 April 2019 and expanded to businesses with a turnover less than $50 million.
  • Farm Household Allowance (FHA) eligibility extended for forced destocking sales.

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  • All farming businesses with turnover under $50m.
  • Drought and flood assistance and concessional loans are welcome relief for struggling pastoralists dealing with high grain prices and extreme weather events across Australia.
  • Grain farmers in Eastern Australia struggling with prolonged periods of drought.
  • North Queensland farmers who will receive tax free grants and concessional interest free loans to assist in rebuilding.

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  • While an extension of FHA access is positive, it is fraught with complexity as funds must be contributed to a complying FMD. This creates difficulty in managing taxes on withdrawal and is unlikely to be far-reaching in application

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James Farm Trust, a grain farming enterprise is budgeting a loss of $400,000 for the 2018/19 financial year because of drought conditions. Mr James has $400,000 in an FMD and withdraws it in March 2019 to assist with cropping inputs.

Mr James is unable to offset the business loss of $400,000 against the personal income of $400,000 and accordingly has income tax of approximately $161,000 to pay whilst dealing with the cash flow effects of drought on the business.

Further alignment of these primary production tax measures with current drought and flood risk would be welcome relief for farmers.

WISHLIST:With approximately $6 billion in FMDs and increasing ‘extreme’ weather events, primary producers would benefit from changes to the FMD scheme, particularly in allowing the deposit to be made within a trading entity as opposed to an individual’s name. This would allow business losses to be claimed against FMD income, effectively giving farmers the ability to drought-proof in a tax effective manner.

Health and aged care -Sunny days ahead.

The Government is aiming to boost health services across Australia by providing $1.3 billion over seven years from 2018-19 to the Community Health and Hospitals Program.

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This funding includes:

  • $100 million for a comprehensive children’s cancer centre in Sydney;
  • $80 million to establish a centre of excellence in cellular immunotherapy in Victoria;and
  • $30 million for the construction of a new brain and spinal ward in South Australia.

As part of a $1.1 billion dollar primary health care plan, the Government has matched Labor's commitment to end a freeze on the Medicare rebate for GP visits with effect from 1 July 2019.

The Government is prioritising mental health, providing $229.9 million over seven years from 2018-19 to improve mental health services, through strengthening social networks and peer groups, supporting social inclusion and increasing treatment options, including:

  • $152 million to reduce waiting lists for ‘Headspace’;
  • $110 million to extend Early Psychosis Youth Services program for two years;
  • $115 million to trial eight adult mental health centres; and
  • $54 million to establish four specialist residential facilities for eating disorders.

The Government is also continuing to invest in policies to support people staying at home longer. This will include:

  • 10,000 additional home care packages across the four levels; and
  • 13,500 additional residential aged care places.

In addition, the Government will provide $5.9 billion over two years from 2020-21 to extend Commonwealth Home Support Programme (CHSP) funding arrangements. This programme contributes to essential home support services, assisting older people to keep living independently in their own home.

Many of the funding measures announced for aged care focused on investment in new regulatory and compliance systems, including:

  • mandatory quality indicators;
  • the Serious Incident Response Scheme;
  • increased home care compliance, including the design and implementation of an end-to-end compliance framework;
  • additional funding for compliance regarding the use of chemical restraint and antibiotics; and
  • a new information sharing and risk targeting system

The Government has committed to invest in medical research through a $5 billion ten year investment plan for the Medical Research Future Fund. This investment spans four themes, patients, researchers, mission and translations. This will include:

  • $614 million for rare cancers and diseases;
  • $220 million for cardiovascular health;
  • $605 million for clinical research;
  • $150 million for stem cell research; and
  • $185 million to establish dementia, ageing and aged care mission.

Through the haze of other expenditures, the Government will also provide $331 million for new and amended listings on the Pharmaceutical Benefits Scheme (PBS).

These investments demonstrate the importance of Australia’s health and medical research sectors.

The Government is also aiming to produce a more active population across Australia by providing $386 million over six years from 2018-19 to build on Sports 2030. This funding includes:

  • $150 million for female change room facilities at sporting grounds and community swimming facilities; and
  • $41 million to provide free sport-based activities for school students through the Sporting Schools Program.

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  • $21.6 billion in 2019-20 to strengthen the safety, access to, and integrity of Australia’s Aged Care system.
  • $1.3 billion over seven years to improve Australia’s health and hospital system.
  • Increased investment in mental health.
  • Increased funding across a wide range of medical research.

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  • Older Australians
  • Universities
  • Research institutions

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  • None

Property & Construction -Strong tailwinds and sunny days ahead.

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Summary of national initiatives

  • New Road Safety Package of $2.2 billion has been announced to improve local road safety and provide upgrades across local road networks.
  • An Urban Congestion Fund to be spread across the different states, with spending increased from $1 billion to $4 billion, including a new Commuter Car Park Fund totalling $500 million. These funds will focus on immediate, practical measures to cut travel times for commuters and improve access to public transport hubs.
  • Roads of Strategic Importance funding will be increased from $3.5 billion to $4.5 billion to be spread across the different states. The funding will support works on regional roads, inter-regional and interstate highways that address pinch points and other impediments to freight movements.
  • Allocation of $250 million towards a Major Project Business Case Fund.

Other initiatives and major projects

  • Central to the Government’s plan is a long-term fast-rail vision for Australia. $2 billion will be provided in the Budget to deliver a fast rail between Melbourne and Geelong which is proposed to slash travel time in half. Fast rail corridors in other areas of Australia are also being planned and include:
  • Sydney to Newcastle
  • Sydney to Wollongong
  • Sydney to Parkes
  • Melbourne to Shepparton
  • Melbourne to Albury Wodonga
  • Melbourne to Traralgon
    • $5 billion has also been committed to build the Melbourne airport rail link.

    The following diagram summarises the budget spending allocation between the different states on the various infrastructure initiatives. Click on the below image to enlarge.

    View larger photo

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    In a bid to further strengthen the economy, the Government has announced they will increase expenditure on new infrastructure initiatives. After all, a strong economy requires ongoing investment in roads, rail, bridges, dams and ports. The objectives of these new infrastructure projects will be to:

    • Ease congestion in our cities
    • Unlock the potential of our regions
    • Better manage population growth
    • Improve safety on our roads.
    • Overall, the Government will allocate $100 billion towards infrastructure spending over the next decade.

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    AUTHORS

    David Rumble

    David Rumble
    Director, Tax Services

     
    Murray Fong  

    Murray Fong
    Principal, Business Advisory

     
    Katherine Brook  

    Katherine Brook
    Senior Manager, Tax Services