Federal Budget measures for business

The Federal Government’s Budget handed down on 14 May has implications for a range of existing programs, and also introduces new programs of interest to Ai Group members. Central amongst these is the Government Future Made in Australia (FMIA) program. The key changes in the budget are listed below.

Read Ai Group’s statement on the Federal Budget – Budget looks over the horizon but inflation means tough times to linger.

Industry policy and Future Made in Australia (FMIA)

Future Made in Australia agenda: $54.7m will be allocated over two years to support policy development for the Future Made in Australia (FMIA) agenda. This will include the establishment of a ‘single front door’ for major investment proposals, and the development of a National Interest Framework to govern industry policy support.

Export Finance Australia (EFA) National Interest Account: A new special account within EFA will be established to support domestic projects considered in the national interest under the FMIA. It will receive $11.4m over four years (~$2.8m p.a.)

Clean energy technology and manufacturing:

• The Australian Renewable Energy Agency (ARENA) will receive $1.5b over seven years (~$215m p.a.) to support investment in renewable energy technology projects. This measure will commence in 2027-28.
• A Future Made in Australia Innovation Fund will be established within ARENA to support early-stage renewable energy technologies. This fund will receive $1.7b over ten years (~$170m p.a.).
• Clean energy manufacturing projects will receive $1.4b over eleven years (~$127m p.a.). This will be divided between solar manufacturing (~$83.5m p.a. over ten years), battery manufacturing (~$69m p.a. over eight years), low carbon liquid fuels (~$5.2m p.a. four years), green metals (~$3m p.a. over six years) and other projects.

Critical minerals support:

• The refining and/or processing of critical minerals will attract production tax credits of 10%. This measure is estimated to cost $7 billion over eleven years (~$600m p.a.). This measure will commence in 2027-28.
• Common-user infrastructure projects for critical minerals processing will be supported with $10.2m of pre-feasibility studies in 2024-25.

Hydrogen support:

• Hydrogen production will attract production tax credits of $2 per kilo. This measure is estimated to cost $6.7b over ten years (~$670m p.a.)
• An additional round of the Hydrogen Headstart program will receive $1.3b over ten years (~$130m p.a.). This measure will commence in 2027-28. This is in addition to the $2b previously allocated to the program.

Quantum computing: The Commonwealth and Queensland governments have jointly acquired a $940 million equity stake acquired in PsiQuantum, an Australian-backed but US-based quantum computer developer. PsiQuantum will build its first error-correcting quantum computer in Brisbane by 2029 as part of the arrangement.

FMIA-related approvals Reform: Various Commonwealth departments will receive resourcing uplifts to improve approvals processes for and community engagement with FMIA-related and energy transition projects. This measure will cost $182.7m over eight years (~$23m p.a.)

FMIA-related skills package: Various skills and training partnerships aligned to the FMIA agenda will receive $218.4m over eight years (~$27m p.a.). These will include:

• $50m capital and equipment investment fund for facility upgrades to expand clean energy training capacity
• $30m to develop the capability of the clean energy, teacher, trainer and assessor workforce.
• $3m for promotion and advocacy for clean energy careers
• Support for SMEs taking on clean energy, construction and manufacturing apprentices through GTOs
• Study on using the international education sector for WIL and apprenticeships.
• $10m for the National Hydrogen Technology Skills Training Centre (in Victoria)

Net Zero Economic Authority (NZEA): The NZEA and its related programs will receive $399.1m over five years to expand support for economic transformation associated with decarbonisation. This will include delivery of the Energy Industry Jobs Plan, workforce transition support programs, and resourcing uplift for the NZEA.

Geoscientific analysis: Geoscience Australia will receive $566.1m over ten years for geoscientific programs to identify and map Australia’s groundwater and resource base.

Education, skills and training

Universities Accord: The first stage of the implementation of the Universities Accord will receive $1.1 billion of funding over five years. This will include:

• Commonwealth Prac Payment: Nursing, teaching, midwifery and social work students will be eligible for $320 per week when undertaking mandatory practical units. This measure will cost $427.4m over four years, with implementation delayed until July 2025.
• Fee-free Uni Ready Courses: Access to fee-free university enabling and preparation courses will be expanded with $350.3m over four years.
• Changed indexation of HELP debts: New rules to limit annual HELP balance indexation (to either the Wage Price Index or Consumer Price Index, whichever is lower). This will cost $239.7m over five years.
• Establishment of the Australian Tertiary Education Commission (ATEC): A new body to drive reform of the tertiary sector, including the harmonisation of regulations and governance to link the university, vocational and training sectors.

Apprenticeships Incentive: An additional $265m over four years will be committed for adjustments to the Australian Apprenticeship Incentive scheme which avoid the step-down across all occupations for 12 months. The Strategic Review of the Incentives system, chaired by Justice Ross and Lisa Paul, will inform long-term policy design:

• Support for Priority Occupation Apprentices: $3000 to $5000 (commencing apprentice payments are restructured to be front loaded with $3500 in year one and $1500 in the second year). (An increase of $2,000 from the scheduled step-down).
• Support for Employers of Priority Occupation Apprentices: $5,000 hiring incentive ($2000 at six months and $3000 at twelve months). (An increase of $1000 compared to the scheduled step-down)
• Apprentices and trainees and their employers in non-priority occupations will no longer receive hiring incentives or payments to the apprentice/trainee

VET systemic support: Structural reforms to the skills and training system will receive $26.1m over four years, including to support the Australian Skills Guarantee, Jobs and Skills Australia, the National Careers Institute and the National Skills Agreement.

Housing construction

Fee-free training for construction workers: The Commonwealth will fund 20,000 fee free training places for workers in the construction and related sectors. This measure will cost $88.8m over three years (~$29m p.a.), and include:

• $62.4m for 15,000 fee-free TAFE and VET places
• $26.4m for 5000 Pre-Apprenticeship Trade Experience program

$1.8m to streamline skills assessments for 1,900 potential migrants with comparable qualifications for the housing and construction sector, and prioritise the processing of 2,600 Trades Recognition (TRA) skills assessments.

Housing infrastructure funding: The Commonwealth will provide $1 billion to state governments to support the construction of infrastructure needed for new home-building, such as roads, energy, sewerage and water.

Tax

Instant asset write-off for small businesses: The scheme, which allows small businesses (those with turnovers capped at $10m) to immediately deduct $20,000 from all eligible assets, will be extended for another year.

Trade

Abolishing nuisance tariffs: Minor tariffs which attract very little revenue, but whose collection imposes red tape – colloquially called “nuisance tariffs” – will be abolished for 457 products. This will cost $10m per annum in foregone tariff revenue.

Live sheep exports ban: A $107m transition package is being offered to assist the sheep industry to transition following the ban on live sheep export announced for 2028.

Engineering stone import prohibition: $32.1m will be provided to Australian Border Force over two years to enforce an import prohibition on engineered stone products.

Southeast Asian engagement: $505.9m will be provided over five years (~$101m p.a.) for various activities to increase government, business and community engagement with Southeast Asia.

Southeast Asian Investment Financing Facility: $2.0b will be invested in a new facility to support trade and investment projects with Southeast Asia. This fund will be administered within EFA’s new National Interest Account.

Digital

Digital ID scheme: Various Commonwealth departments will receive a resourcing uplift to support the roll-out of the Commonwealth’s Digital ID scheme. This includes the development of a pilot of a government-backed digital wallet. This measure will receive $288m over four years (~$72m p.a.).

Digital trade: A digital trade processes acceleration program will support various trade digitisation initiatives, at a cost of $29.9 million over four years (~$7.5 million p.a.) This advances the longstanding commitment to the Simplified Trade System.

Safe and Responsible Artificial Intelligence (AI): Several programs to support safe and responsible deployment of AI will receive $39.9m over five years (~$8m p.a.). Around half will be used to reshape the National AI Centre (NAIC) as an AI advisory body, which will move from CSIRO into the Department of Industry, Science and Resources.

Circular Economy and Waste

Waste export levy abolished: The $4 per tonne levy on waste exports, which was due to begin in July 2024, has been abolished. The levy would have provided a disincentive for recyclers who exported processed waste.

Waste export licensing partial cost recovery: The waste export license scheme will be continued, with $7.9m allocated for administration in 2024-25. However, partial cost recovery measures will also be introduced for users.

Chemicals management cost recovery abolished: The Government will not proceed with previously planned Industrial Chemicals Environmental Management Standard cost recovery from industry, foregoing $14.2 million over four years.

Infrastructure

Priority infrastructure projects: 65 priority infrastructure projects will share in $4.1b of new funding over seven years (~$585m p.a.). Nine existing projects in the Infrastructure Investment Program will receive an additional $10.1b over eleven years.

Western Sydney Airport: $302.6m will be allocated over five years to support infrastructure requirements at the Western Sydney Airport.

Australian Strategic Fleet: The establishment of a Strategic Fleet Pilot program will receive $21.7 million over five years (~$4.3m p.a.)

Defence and defence industry

National Defence Strategy (NDS) and Integrated Investment Program (IIP): An additional $50.3b over ten years will be provided to deliver capabilities identified in the 2024 NDS and IIP.

Defence Industry Development Grants: A new program offering grants to Australian defence industry to respond to Defence capability requirements will be established, with $165.7m in funding over five years (~$33m p.a.)

Defence Trade Controls Act: New administrative and permitting systems required to support the amendments to the Defence Trade Controls Act will receive $28m.

Nuclear-powered submarine workforce: Several programs to develop the workforce required to deliver and sustain nuclear submarines will receive $101.8m over seven years (~$15m p.a.)

Income support and cost-of-living measures

Energy bill relief: An energy bill relief rebate will be extended to all households and eligible small businesses in 2024. These will be worth $300 for households and $325 for small businesses. This measure will cost $3.5 billion over two years.

Rent Assistance: Rent Assistance payments to low-income households will be increased by a further 10% in 2024-25, building on a 15% increase in the last budget. This measure will cost approximately $400 million per year.

HELP Debt relief: The Commonwealth will relieve approximately $3 billion of existing HELP liabilities (HECS and other schemes).

Superannuation on government-funded PPL: Superannuation will be paid on government-funded paid parental leave (PPL). This measure will cost approximately $600 million p.a. Implementation of the measure will be delayed until July 2025.

JobSeeker payments for partial capacity to work: JobSeeker participants with a partial capacity to work (zero to fourteen hours per week) will be elgibile for the higher-rate of JobSeeker. This measure will cost $41.2 million over five years.

Stage 3 income tax reprofiling: Changes to the profile of the Stage 3 income tax cuts will reduce income tax liability for all taxpayers. In comparison to the original Stage 3 package, the newly ‘reprofiled’ package introduces a number of changes, including:

• Reducing the 19 per cent tax rate to 16 per cent (for incomes between $18,200 and $45,000).
• Reducing the 32.5 per cent tax rate to 30 per cent (for incomes between $45,000 and the new $135,000 threshold).
• Retaining the 37 per cent tax rate that applies from $120,000 to $135,000.
• Increase the threshold at which the 45 per cent tax rate applies from $180,000 to $190,000.

Overall, the reprofiling will offer income tax relief to taxpayers with a taxable income below $146,486; but will reduce the income tax relief being offered to those at higher incomes. The Stage 3 reprofiling will deliver a small increase to revenue ($1.3 billion) in this year’s budget, but be broadly revenue neutral over the medium term.

Support for long-term net migration

Permanent migration cap: The planning level for permanent migration has been set at a long-term level of 185,000, of which roughly 70% will be allocated to skills streams.

Migration forecasts: Net overseas migration (NoM) is estimated to be 260,000 in 2024-25, significantly lower than 395,000 in 2023-24.