October 2020
October is here and it’s shaping up to be a busy month. Many of us are planning to take advantage of the October long weekend and the fact our kids are finally heading back to school (we made it!), while Melbourne has announced a further easing of restrictions. At King & Whittle all eyes were on last night's Federal Budget announcement, to which most of this month's newsletter is dedicated to. While most articles relate to last night's budget, we also have a video recorded by King & Whittle's Wealth Management Director, Bruce Dyason. A further initiative to King & Whittle's ongoing commitment in client care you will see a 90 Second Checklist being sent with taxation documents. This checklist highlights areas of concern - as now more than ever it is imperative we ensure your superannuation, insurances, investments and other wealth matters are well-structured.
Last night's scene was set for one of the most important Federal Budgets in living memory, after COVID-19 delayed the usual May delivery to October 6. In September it was confirmed that Australia is in recession. The economy contracted 7% in the June quarter following the 0.3% fall in the March quarter, taking the annual decline to 6.3%, the biggest since 1945. The pandemic has also hit the federal budget bottom line, with a budget deficit of $85.3 billion in the 2019/20 financial year. The biggest government stimulus program since WWII took net government debt to $491 billion, or 24.8% of GDP, with more spending on the cards.
Against this backdrop, there is mounting speculation that the Reserve Bank could cut the cash rate as early as next week, from its current record low of 0.25%, to help stimulate the economy. A rise in the Aussie dollar could tip the balance. The dollar ended September around US71.5c, down 2c over the month, after dipping as low as US70c.
On a positive note, the ANZ-Roy Morgan consumer confidence index rose for four weeks straight in September, to a 14-week high of 95 points (although still 19.7 points lower than a year ago). The NAB business confidence index also improved, from -14.2 points to -8.0 points in August. Unemployment is also headed in the right direction, down from a 22-year high of 7.5% to 6.8% in August.
We are also getting a lot of enquiries as to whether our appointments in the Gisborne office will be in person since restrictions in regional Victoria have eased. At the moment, in the interest of keeping you and our team safe, we will continue conducting our appointments remotely via Zoom or over the phone. However, while our offices are closed it is still business as usual at King & Whittle and we are here to help in any way we can.
As ever, if you know of anyone that could benefit from our superior Taxation, Accounting or Wealth Management advice we would be honoured if you referred them to us. And, if you are happy with our service, the best recognition is to leave us a review by clicking here for Gisborne or here for Melbourne.
Federal Budget 2020-21: Analysis from a tax perspective
Tax and business investment took centre stage in the Federal Budget this year, as the Morrison Government seeks to reboot growth and repair the damage wrought by COVID-19 on Australia’s economy and employment.
Treasurer Josh Frydenberg emphasised the Coalition’s focus on tax by bringing forward the start date for the next round of tax changes. Backdated to 1 July 2020, the measures will provide immediate tax relief for individuals and small businesses. They also represent a significant step in reshaping Australia’s current progressive tax system.
In addition, the reintroduction of measures allowing the carry-back of tax losses and a significant expansion of existing asset write-offs should help support medium and small businesses who have been facing some of the toughest trading conditions in living memory.
A Message from Wealth Management's Director, Bruce Dyason
Insolvencies go undetected, for now
As the Government begins to unwind special measures put in place to help businesses through the COVID-19 pandemic, business owners face some potential new challenges.
Your business could be financially exposed to ‘zombie’ companies that are relying on loan repayment deferrals, relaxed insolvency rules and extended payment times for survival.
Recent data from CreditorWatch shows the number of struggling businesses going into administration is 59 per cent lower than the average across 2019. Also, of the 105,000 loan deferrals granted to small and medium businesses on their bank loan, only 22 per cent have started making full repayments.