By Linda Daniele
The Treasurer released the 2020/21 Mid-Year Economic and Fiscal Outlook (MYEFO) on 17 December 2020.
The MYEFO continues to build upon the government’s Economic Recovery Plan, set out in the 2020–21 Budget, by supporting Australians and the economy with additional COVID-19 response measures, the 5-year JobMaker Plan and extension of the Coronavirus Supplement.
The majority of the tax and superannuation measures announced in the MYEFO have previously been announced or implemented by the government. For completeness, following is a list of all relevant announcements from the MYEFO, with their status.
Extending the Coronavirus Supplement
The government has extended the Coronavirus Supplement at a rate of $150 per fortnight and extended other temporary income support eligibility measures from 1 January 2021 to 31 March 2021.
In addition, expanded eligibility criteria and changes to income testing arrangements will continue to apply for JobSeeker Payment and Youth Allowance (other). The relaxed partner income test for JobSeeker Payment will continue and the Ordinary Waiting Period, Newly Arrived Resident’s Waiting Period and Seasonal Work Preclusion Period will continue to be waived.
This measure was announced on 10 November 2020 and has been legislated. The Social Services and Other Legislation Amendment (Extension of Coronavirus Support) Bill 2020 received assent as Act No 140 of 2020 on 17 December 2020.
JobMaker Plan — temporary full expensing, expansion of eligibility and minor amendments
The government will support business investment and economic recovery by expanding eligibility for the JobMaker Plan, announced in the 2020–21 Budget.
Under the original measure, temporary full expensing is available for businesses with aggregated annual turnover of less than $5 billion. The government will introduce an alternative eligibility test to allow businesses with less than $5 billion in statutory and ordinary income (excluding non-assessable, non-exempt income) in either the 2018–19 or 2019–20 income year (provided the income year ends on or before 6 October 2020), and that have invested more than $100 million in tangible depreciating assets in the period 2016–17 to 2018–19 to also qualify. These businesses will be able to deduct the full cost of eligible tangible depreciable assets acquired from 7.30 pm AEDT on 6 October 2020 and first used or installed ready for use by 30 June 2022. Businesses that qualify under the existing $5 billion aggregated annual turnover test will not be required to apply the alternative test.
Businesses will also be allowed to opt-out of temporary full expensing and the Backing Business Investment incentive on an asset-by-asset basis. This will provide greater flexibility in accessing the incentives to encourage businesses to bring forward investment. To ensure integrity of the measure, the Government will introduce a balancing adjustment to prevent the tax benefit of temporary full expensing from being retained if an asset is no longer being used primarily for business purposes, or moved out of Australia.
The JobMaker Hiring Credit scheme was announced in the 2020–21 Budget and has been legislated. The Economic Recovery Package (JobMaker Hiring Credit) Amendment Bill 2020 received assent as Act No 96 of 2020 on 13 November 2020, with rules to establish the scheme made in Coronavirus Economic Response Package (Payments and Benefits) Amendment Rules (No 9) 2020.
The government will continue its support for the residential construction sector by extending the HomeBuilder program to 31 March 2021. HomeBuilder has assisted the residential construction sector through the pandemic by supporting jobs and maintaining activity throughout the second half of 2020. The extension of HomeBuilder will support the pipeline of construction activity over 2021 and into 2022.
COVID-19 response package — further updates to making Victoria’s business support grants non-assessable, non-exempt income for tax purposes
Further to the 2020–21 Budget measure “COVID-19 Response Package — making Victoria’s business support grants non-assessable, non-exempt income for tax purposes”, non-assessable non-exempt tax treatment will apply to businesses with an annual turnover below $50 million. Recognising that the proposed tax treatment will only be provided in exceptional circumstances, eligibility will be limited to grant programs directed at supporting businesses who are the subject of a public health directive applying to a geographical area in which the businesses operate and whose operations have been significantly disrupted as a result of the public health directive.
Consistent with this, the government has made grants provided under the $30 million small and medium business component of Victoria’s Melbourne City Recovery Fund program, announced on 14 September 2020, eligible for this income tax treatment.
These measures have been legislated in Treasury Laws Amendment (2020 Measures No 5) Bill 2020 (received assent as Act No 118 of 2020 on 11 December 2020).
Miscellaneous amendments — ongoing care and maintenance of Treasury portfolio legislation
The government will make a series of minor amendments to Treasury portfolio legislation that clarify the law to ensure it operates in accordance with the policy intent, make minor policy changes to improve administrative outcomes, and correct technical or drafting defects. These changes are part of the Government’s ongoing commitment to the care and maintenance of Treasury portfolio laws.
These measures have been legislated in Treasury Laws Amendment (2020 Measures No 6) Bill 2020 (received assent as Act No 141 of 2020 on 17 December 2020).
Superannuation — amendments to commutation rules for certain income stream products
The government is amending the law to ensure that retirees who have commuted and restarted certain market-linked pension, life expectancy pension and similar products are treated appropriately under the transfer balance cap.
The measure will enable retirees with these products who have been unable to commute amounts in excess of their transfer balance cap to undertake the necessary partial commutation. The measure also ensures appropriate tax outcomes for these retirees given their prior inability to comply with the transfer balance cap rules.
These amendments have not yet been legislated. The amendments will take effect from the date the relevant Bill receives Royal assent.
Changes to foreign investment monetary thresholds and fees
The government will remove from 1 January 2021 the temporary $0 foreign investment monetary screening thresholds introduced in response to COVID-19 and make minor adjustments to the fee framework for foreign investment applications which will commence on 1 January 2021.
This measure builds on the July 2020 Economic and Fiscal Update measures “COVID-19 Response Package — Treasury” and “Reforming Australia’s Foreign Investment Framework” and the 2020–21 Budget measure “Strengthening Australia’s Foreign Investment Framework”.
Philanthropy — changes to the governance standards for charities
The government is making amendments under the Australian Charities and Not-for-profits Commission Regulation 2013 to prohibit charities from engaging in certain types of unlawful activity or using their resources to promote unlawful activity. Under these amendments, charities registered with the Australian Charities and Not-for-profits Commission:
- • must not engage in conduct that may be dealt with as a summary offence relating to real property, personal property or persons under an Australian law
- • must not use their resources to promote or support unlawful activity.
This measure forms part of the government’s response to recommendation 20 of the Australian Charities and Not-for-profits Commission Legislation Review 2018, as released on 6 March 2020.
Philanthropy — incentivising charities to join the National Redress Scheme for Institutional Child Sexual Abuse
The government will introduce a new Australian Charities and Not-for-profits Commission (ACNC) governance standard requiring registered charities to take reasonable steps to become participating non-government institutions in the National Redress Scheme for Institutional Child Sexual Abuse (Redress Scheme) if the charity is, or is likely to be, identified as being involved in the abuse of an applicant for redress under the Redress Scheme. To complement the new governance standard, the government will amend the eligibility criteria for basic religious charities (BRC) in the Australian Charities and Not-for-profits Commission Act 2012 so that BRCs who have a claim against them under the Redress Scheme must join the Redress Scheme to retain their BRC status. Relevant BRCs who fail to join the Redress Scheme will no longer be eligible for BRC status and therefore must comply with the ACNC governance standards. Amendments to the definition of basic religious charity are contained in Treasury Laws Amendment (2020 Measures No 6) Bill 2020 (received assent as Act No 141 of 2020 on 17 December 2020).
Charities registered with the ACNC may be eligible for a range of tax concessions, such as an income tax exemption, goods and services tax concessions, fringe benefits tax exemption or rebate, and deductible gift recipient status. Registered charities, with the exception of BRCs, must comply with the ACNC governance standards to maintain their registration and access to tax concessions.