The 2021 Federal budget was recently announced, pitched as a come-back budget securing Australia’s recovery from the COVID-19 pandemic. Much of the focus was on Australia’s comparatively low rate of infection compared to other developed nations; better-than-expected unemployment rates of 5.6% and economic contraction of 2.5% (compared to Treasury projections of 15% unemployment and 20%+ economic contraction); and emergency economic measures like JobKeeper and JobSeeker helping to weather Australia’s first recession in almost three decades.
But with the pandemic far from over, what does the government’s “plan to secure Australia’s economic recovery and build for the future” mean for Tasmanian energy, mining, and other industrial businesses?
Here we step out 5 key budget items and explain what they mean for you.
1. Focus on climate adaptation technology, such as hydrogen and carbon capture
“Technology, not taxes” is how Treasurer Josh Frydenberg describes the government’s approach to net zero emissions. The 2021 budget commits significant funding for decarbonization technologies, including a further $1.6 billion for emissions reduction and new investments under the existing Technology Investment Roadmap.
Over 10 years, the government plans to spend $1.2 billion to create a ‘technology co-investment facility’. Focus areas will include developing regional hydrogen hubs; carbon capture, use and storage (CCUS) technologies; low cost soil carbon measurement, and new agriculture feed technologies.
The government has backed its commitment to building up Australia’s hydrogen industry, with $539.2 million for new hydrogen and CCUS. This includes $275.5 million for four additional clean hydrogen export hubs (Bell Bay has already been named as a potential site), and $263.7 million for carbon capture technologies and hubs.
Just under $280 million has been earmarked to establish a ‘below baseline crediting mechanism’ – which would essentially reward large emitters for cutting their emissions below a set limit – and to explore other opportunities for abating emissions in industrial settings.
And $26.4 million will be spent over four years to help business become more energy efficient, both through equipment and business practices, also resulting in lower costs and improved productivity.
2. Expanding manufacturing activity
Frydenberg says “Australia’s manufacturing sector will be a key driver of future jobs and higher wages.” The government has committed an additional $2 billion in research & development tax incentives, which builds on $1.5 billion dollars already announced late last year for the four-year Modern Manufacturing Strategy. The six National Manufacturing Priorities include resources technology and critical minerals processing, as well as recycling and clean energy.
Tasmanian agriculture, forestry, fisheries, manufacturing, and mining industries will also benefit from $89.3 million over four years to extend the eligibility of the Tasmanian Freight Equalisation Scheme.
3. Extending the Junior Minerals Exploration Incentive (JMEI)
The government will extend the Junior Minerals Exploration Incentive, which was due to wrap up on 30 June this year. An additional $100 million will take the Incentive through to mid-2025.
The JMEI aims to attract natural resources investment in smaller companies undertaking greenfield mineral exploration. It allows eligible businesses to convert losses from greenfield exploration spending into tax credits. The ATO then allocates these credits to investors as refundable tax offsets for individuals and super funds, or as additional franking credits for corporate investors.
4. Diversifying export markets
Export market diversification was named as a key priority over the coming year. The government allocated $20.1 million dollars for a Global Resources Strategy to support diversifying exports in the resources sector. The focus will be on better collaboration across government and industries to find new investment opportunities, both in established and new markets. This should balance market volatility and reduce industries’ reliance on trade with China.
The Agri Business Expansion Initiative will also help food and agriculture exporters to strengthen and expand their global export options.
5. Business write-off perks (carry back tax losses and full expensing of eligible asset purchases)
A loss ‘carry-back’ is when tax paid on previous years’ profits is refunded, based on loss incurred in subsequent years. Companies with aggregated turnover of less than $5 billion will be able to carry back tax losses from the 2022-23 income year, to offset previously taxed profits from the 2018-19 (or later) income years.
This is an extension of the temporary scheme announced under last year’s federal budget.
Companies will also be able to write off the total value of any eligible asset purchased between 2020 and 2023. Frydenberg said under the last budget, the measure boosted “spending on machinery and equipment increase at the fastest rate in nearly 7 years.”
Putting the numbers to work
How can your business benefit from government funding and focus on areas like decarbonization, energy and process efficiency, modern manufacturing and more? Ellis Richmond can help you improve your operations and position your business to capitalise on these opportunity areas.
Reach out for a chat – we’d love to help.