We know the global financial crisis had its genesis in the United States. On 13 February 2009 the Federal Parliament passed historic legislation on a $42 billion stimulus designed to help guide Australia through the deepest global recession since the Great Depression. In designing this stimulus package – and the $10.4 billion pre- Christmas package – the Rudd Government had small business firmly in mind.
By boosting consumer spending, both initiatives will lift retail sales above the levels they otherwise would have been. There has been a great deal of political debate about the wisdom of seeking to boost spending by paying cash bonuses to Australian consumers.
The Government, drawing upon advice from organisations such as the Australian Treasury, the International Monetary Fund and most business organisations and economists, believes that cash payments are effective in boosting consumer spending and retail sales.
The Coalition, however, has opposed cash payments to consumers, with members of the Opposition describing the package as a ‘poor-quality spend’.
At the core of the package is $12.2 billion in assistance to households to support economic growth and jobs.
The Nation Building and Jobs Plan includes:
- A Tax Bonus for Working Australians of $900 for individual taxpayers with a taxable income of up to $80,000 each.
- A Single Income Family Bonus of $900 to provide additional assistance for families that have one main income earner and may otherwise receive less assistance from the package than two-income families with similar household income.
- A Farmer’s Hardship Payment of $950 which will be paid to farmers and others receiving Exceptional Circumstances related income support.
- A Training and Learning Bonus of $950 to assist students, those returning to study or training and some income support recipients.
- A Back to School Bonus of $950 per child to assist low and middle income families eligible for Family Tax Benefit A with school age children.
Around 8.8 million families and single people are expected to receive payments.
The Tax Bonus will be paid as a lump sum from April. The Tax Office will make the payment after determining eligibility.
For the majority of recipients the payments for the Single Income Family Bonus and the Back to School Bonus will be made automatically by Centrelink in the fortnight starting 11 March.
The Government will also provide an additional $2.7 billion temporary tax break to small and other businesses. Small businesses will be able to access the tax break for assets costing $1000 or more. For all other businesses, the asset threshold is $10,000.
The tax break provides an additional tax deduction for assets acquired from 13 December 2008 to 30 June 2009, where the asset is also installed before 30 June 2010.
The deduction will be equal to 30 per cent of the asset’s cost. For assets acquired between 1 July 2009 and 31 December 2009 and where they are installed ready for use before 31 December 2010, the deduction is 10 per cent of the asset’s cost. The revised investment allowance will therefore encourage small businesses to bring forward capital investments and to undertake investments that they otherwise might not have contemplated.
It will also boost small business cash flow by providing an extra deduction for capital expenditure. Benefits for households, small businesses and independent contractors do not end there.
Small retailers, with an annual turnover of less than $2 million, may be eligible for a 20 per cent discount on their December quarter PAYG income tax instalment payable by 3 March 2009. The discount will be applied automatically by the Tax Office for eligible small businesses.
The Rudd Government and other Members of Parliament concerned about the national interest have joined together to pass the $42 billion fiscal stimulus package through the Senate and into law.
There will be no quick fixes in these economic times but we need to act quickly and decisively to support Australian households, businesses, jobs and growth.
