2020 Federal Budget: What it means for Agribusiness

Big funding for water, local manufacturing and an expansion of the instant asset write-off for businesses featured in this year’s Federal Budget.

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Highlights

We asked business in September what policies would benefit their businesses. The most popular measures for agricultural businesses were a one-off payment to cover disruption (31%), relief on interest payments on loans (27%) and direct subsidies to areas most impacted (23%). Notably, agricultural enterprises were much less interested on part payment of employees compared to businesses overall, but more interested in interest rate relief. The most popular potential tax reduction by far was income tax, with 42% of agricultural enterprises nominating it, compared to around a third of all businesses.

  • $2b for National Water Grid
  • $1.5b for local manufacturing, including food manufacturing
  • $553m for supporting regional Australia
  • $328m to support agricultural exporters
  • $270m for the Murray-Darling basin
  • $156m for drought support
  • Major expansion of the instant asset write-off, introduction of carry back provisions
  • Stage 2 of personal income tax cuts brought forward

What agribusinesses wanted?

We asked business in September what policies would benefit their businesses. The most popular measures for agricultural businesses were a one-off payment to cover disruption (31%), relief on interest payments on loans (27%) and direct subsidies to areas most impacted (23%). Notably, agricultural enterprises were much less interested on part payment of employees compared to businesses overall, but more interested in interest rate relief. The most popular potential tax reduction by far was income tax, with 42% of agricultural enterprises nominating it, compared to around a third of all businesses.

What did the Budget deliver?

Tax changes
A key feature of the 2020-21 budget a very substantial expansion of the instant asset write-off. Businesses with a turnover of less than $5b can now deduct the full cost of eligible capital assets until 30 June 2022. This will apply to new depreciable assets and the cost of improvements to existing eligible assets. SMEs (with aggregated annual turnover of less than $50m), can also fully expense second-hand assets. The total cost of this is $26.7b over the forward estimates.

Businesses with a turnover of less than $5b can also carry back tax losses from the 2019-20, 2020-21 or 2021-22 income years to offset previously taxed profits in 2018-19 or later income years.

Stage 2 of the Personal Income Tax Plan has been brought forward to 1 July 2020 from 1 July 2022.

National Water Grid
The budget sets out an additional $2b over 10 years (just over half of which is in the forward estimates) to fund priority water infrastructure projects for agriculture and to increase water security. This includes (alongside states) and additional $162.5m for the Wyangala Dam and $121.0m for the Dungowan Dam.

However, the budget also announced that the government will now not proceed with the National Water Infrastructure Loan Facility, previously announced in 2017. This facility was intended to provide concessional loans to state and territory governments for water infrastructure. Not entirely coincidently, this facility was intended to cost $2b when it was set up. In effect, 2020-21 budget has redirected the priority from concessional loans to grant funding.

Modern Manufacturing Strategy
The Modern Manufacturing Strategy sets out $1.5b over five years to improve competitiveness, scale and resilience in Australian manufacturing. The strategy will focus on six areas: resources technology and critical minerals processing, food and beverages; medical products, recycling and clean energy, defence and space. The strategy includes:

  • $1.3b to establish the Modern Manufacturing Initiative
  • $107.2m for supply chain vulnerabilities
  • $52.8m for manufacturing modernisation
  • $30m to improve competitiveness
  • $20m to Industry Growth Centres

Supporting regional Australia
While not an explicit support to agriculture, the budget does provide $552.9m over the forward estimates for support for regional Australia, including for community infrastructure, health, R&D, tourism, regional recovery and digitisation.

Support for agricultural exporters
The budget provides $328.4m over the forward estimates to help agricultural exporters do business. This includes$222.2m to modernise ICT systems and business processes, $71.1m for the financial sustainability of export certification services and $35.2m for “targeted interventions” and regulatory reforms.

Murray-Darling communities investment package
The budget provides $269.6m for the Murray-Darling basin. This includes:

  • $37.6m to extend the Murray-Darling Basin Economic Development Program;
  • $37.6 for the environment in the SA Riverland;
  • $24.5m for community grants for river and wetland health;
  • $4.2m for Indigenous River Rangers;
  • $38.7 for compliance, including to set up the Inspector-General of Water Compliance;
  • $25m to improve metering systems, particularly in the northern basin;
  • $7.5m track and ecological, economic and social conditions;
  • $6m for improved information;
  • $70.5m to accelerate at-risk projects in the Basin Plan; and
  • $18m for Basin Plan implementation.

Drought support
The budget sets out $155.6m for drought support, including:

  • $50m in 2020-21 for the On-farm Emergency Water Infrastructure Rebate Scheme;
  • $19.6m in 2021-22 to extend the drought function of the National Drought and North Queensland Flood Response and Recovery Agency for a further year; and
  • $86m over four years to establish eight Drought Resilience and Adoption Hubs.

Other measures
Other measures include:

  • $36.6m for changes to the the Environment Protection and Biodiversity Conservation Act 1999; and
  • $2.4m to extend the Improved Access to Agricultural and Veterinary Chemicals program.

Read more in our 2020 Federal Budget: What it means for Agribusiness report