The Australian Federal Government delivered its COVID-19 delayed 2020 Budget yesterday. It contains a mix of spending and immediate tax reductions to stimulate economic growth.
The headline tax measures in the Australian Budget include:
For business:
Like New Zealand, the Australian Budget contains a sea of red ink. A comparison of key economic and fiscal forecasts suggests a broadly similar economic and fiscal trajectory.
|
2019-20 |
2020-21 |
2021-22 |
2022-23 |
GDP Australia NZ |
-0.2% -3.1% |
-1.5% -0.5% |
4.75% 3.6% |
2.75% 3.9% |
Unemployment rate Australia NZ |
7% 4% |
7.25% 7.7% |
6.5% 7.6% |
6% 6.6% |
Budget (% of GDP) Australia NZ |
-4.3% -7.7% |
-11% -10.5% |
-5.6% -6.9% |
-4.2% -4.2% |
Net Debt (% of GDP) Australia NZ |
24.8% 27.6% |
36.1% 43% |
40.4% 49.9% |
42.8% 53.5% |
Given the importance of trade and open borders to New Zealand’s economic recovery, Australia’s fortunes are inextricably tied to our own.
The Australian Government’s Budget response includes measures New Zealand has already adopted (such as implementing a tax loss carry back) and some policies (or variations thereof) on offer in parties’ election manifestos (see our 2020 election policies Taxmail for more detail).
A minor, but welcome, announcement is a legislative clarification to Australia’s corporate tax residency test to confirm that a company incorporated outside Australia will only be treated as Australian tax resident if its core commercial activities are undertaken there and its central management and control is in Australia. This follows an ATO ruling in 2017, which created considerable uncertainty, including for New Zealand subsidiaries of Australian businesses. Once enacted, it will be able to be applied retroactively to the date of the ATO ruling.
For more on the Australia Budget, click here to read KPMG Australia’s detailed analysis