There is a long wait for returning to “normal”, with the borders between the State and Territories all but open and 2021 insight. The Reserve Bank of Australia has cautioned that the recovery will be uneven and GDP is not expected to reach the level it was before the pandemic till the end of 2021. In this blog, we will be discussing the opportunities that will show up in 2021.
Opportunities in 2021 for Employee and Employer
1. Employers and Job Building
Lowering the rate of unemployment is the top-most priority of the government. The rate of unemployment is predicted to decline in 2021. With excessive capacity in the market, wage growth will also be subdued.
Background – Over 3 ½ million individuals received the payment from April to July 2020, which means that JobKeeper lowered the total employment losses by a minimum of 700,000 for the same period.
The number of businesses accessing the JobKeeper lowered by 450,000 in October 2020. Now the shift is to create jobs, not just keeping them.
Below are numerous incentives for employers to grow skills and employment:
A hiring credit of 12-month available for jobs created from October 7th, 2020 to October 6th, 2021 that gives a payment to employers of $200 each week for eligible new employees of age between 16 and 29. Moreover, for people of age between 30 to 35 years, $100 each week for eligible employees. The eligibility restrictions apply to the business and the employee.
The subsidies of 50% of an apprenticeship wage are available for the new and existing apprentices to maintain their employment. The scheme is applicable to the wages of new apprentices from October 5th, 2020 and September 30th, 2021, and for existing apprentices it is, January 1st, 2020 to March 31st, 2021. The eligibility requirements apply to the businesses and the apprentice.
These subsidies are also available for the employers who have engaged in such as plumbers, carpenters, hairdressers, bakers, vehicle painters, floor tilers, mechanics of refrigeration and air-conditioning, etc.
Incentives Based on State
The tax breaks motivate employers to employ more workers and are the biggest now. The Victorian has declared recently a New Jobs Tax Credit for SMEs of ten cents for every dollar of increased taxable Victorian Wages. NSW has lowered the payroll tax to 4.85% from July 1st, 2020. There is also a number of incentives that are targeted to particular areas such as the NSW regional growth fund. WA also offers an Employer Incentive Scheme having a base payment of $8500 for employing apprentices.
2. Home Builder & the Housing Industry
The Home Builder scheme has the provision of a tax-free grant to building a new home or renovating. To date, approximately 27,000 homes are expected to get covered under the scheme. The highest number of applications has come from Victoria followed by Queensland.
The Assisted Treasurer has announced recently an extension of the Home Builder Scheme from January 1st, 2021 to March 31st, 2021. For the new build contracts signed between January 1st, 2021 and March 31st, 2021:
- The eligible owner-occupier purchasers will get a $15000 HomeBuilder grant
- The property price caps for the new builds in New South Wales and Victoria will get increased to $950,000 and $850,000 respectively.
Moreover, the construction initiation deadline got extended from 3 to 6 months for all eligible contracts signed on or after June 4th, 2020.
Changes in Licensing Requirements and Registration for Developers and Builders:
- The builder should hold a valid license or registration before November 29th, 2020, where an eligible contract is signed on or after November 29th, 2020.
- The builder or developer must have a valid license or registration before June 4th, 2020, where an eligible contract is signed before November 29th, 2020.
The eligibility criteria for accessing the HomeBuilder remain the same. To be eligible, you are required to be an individual owner-occupier, an Australian citizen, 18 years or more of age, and also must pass the income test.
The grants are available if you build a new home in which the value of the house and the land does not exceed the threshold or a renovation in which the value of the property is $1.5 million or less.
Extension in the Rules for Writing Off Assets: Australian Subsidiaries of Global Companies to Benefit
The Government introduced a measure that allows businesses with a turnover under $5 billion to deduct the cost of new depreciable assets and the cost of improvements to the existing assets during the first year of use. It means that the cost of the asset will be completely deductible in the year it’s installed ready for use.
The amended rules will enable the businesses of the aggregated annual turnover of $5 billion or more, to access the measures if they may satisfy an alternative test. The entities can pass the test if they have:
- Less than $5billion statutory and ordinary income in 2019 or 2020 income year.
- Incurred more than $100million in expenditure on tangible depreciating assets between income years 2017 and 2019.
International Ties on Risks in 2021
COVID-19 rules and regulations
As we are emerging from the pandemic, the promise of the availability of the vaccine is still over the horizon and another wave remains real. It is essential for the businesses to assure that the COVID-19 safe conditions are maintained. Lockdown conditions also risk the survival of the businesses and hefty fines for breaching public health orders. As per the reports, fines of around $1,000 applied to the individuals and $5,000 for the businesses, and in Queensland, fines of up to $13,345 and prison might apply to the individuals and business operators defying the health orders.
Relationships of Australia with China
Non-compliance with China will certainly come at a cost. In response to Australia’s public positioning, China has flexed its economic muscle through the disruption of Australian exports.
Australia pushes for a formal inquiry into, matter from where the COVID-19 originated
Almost 80% tariff on Australian barley on the basis that the barley is undervalued and subsidized. China is an importer of 70% of the Australian barley crop.
Suspension of beef exports from four Australian processing plants related to 2019 investigation regarding inconsistencies with consignments certificates for frozen and chilled beef products. China is the largest importer of Australian beef at 24% followed by Japan and the USA, with 23% and 20%.
According to China, wheat will face “enhanced inspection”. The imports of wheat from the US to China have increased.
The Chinese importers were instructed to stop purchasing seven types of Australian exports- coal, barley, copper ore and concentrate, timber, sugar, lobster, and wine. At the time of banning, the goods in transit have been in non-existence as $2 million rock lobsters were left on the tarmac because they were not able to clear the customs at Shanghai airport.
107% to 212% “provisional” tariff imposed on Australian wine on the accusation that Australian wine is being dumped on the Chinese wine manufacturers. Treasury Wine Estate represents almost 40% of the total annual wine export market to China, it went into a trading halt after declaration by china.
China is Australia’s largest trading partner by a margin that dwarfs trade with any other single nation. Since the signing of the China-Australia Free Trade Agreement, the value of exports to China has doubled. There is also a rise of up to 42% in imports over the same period.
Iron ore is still Australia’s top export to China and a high demand resource to fuel the expansion of China’s economy – China is the world’s largest steel producer. According to the South China Morning Post,
Australian iron ore makes up 60% of China’s supply.
Now the question is, “What does 2021 carry”?
With the Prime Minister and the Defence Minister acknowledging China’s economic success that lifts millions of people out of poverty, there is a conciliatory language from the Australian Government. However, Australia has not publicly backed down with the announcement of a new defense pact with Japan and Hong Kong. There will likely be more pain to come for Australian exports to China and no short-term conciliation.
The Australian economists are fairly united with the fact that there are many “zombie businesses” that are alive by JobKeeper. These businesses only survive due to the salary and wages are propped up by the subsidies. The alarming condition for these businesses is that they continue to take on debt. The JobKeepr completes in March 2021 that coincides with the worst cashflow of the months of the year. It will be crucial to assure that your business is on the top of the debtors and is not a bank of your customers. It is also significant to know the position of the cashflow and rely on the top of the labor costs.
Get Our Assistance
This year has taught us all to be resilient and patient. We now have a stark reminder of things that are important in life.
Reliable Bookkeeping Services intend to inform you about recent changes in the announcement made by the Government and pledge to get the most out of the incentives provided by the authorities for you. Let’s start in 2021 with renewed energy and vigor. Stay safe and stay well, we will look forward to work with you.