How will the Australian federal budget impact the agricultural sector?
05 November 2020
Australia’s agribusiness sector generates an annual total revenue of $280.5 billion, making it one of the largest economic sectors in the country. The Federal Government released the 2020-2021 budget with a number of measures announced to specifically benefit Australia’s agribusiness sector. The focus of this year’s federal budget is economic growth to boost Australia’s economy following the COVID-19 pandemic. The pandemic forced the Government, businesses, employees and the wider community to pivot and adapt at an unprecedented speed. As a consequence of the cumulative effect of both the health and economic crisis, the Federal Budget for 2020-2021 provides a pathway to economic recovery.
Agribusinesses should consider the Federal Budget announcements and seek professional advice about how to take full advantage of the budget relief and initiatives.
The agricultural workforce
Access to seasonable workers became a highly relevant issue as a consequence of international and state COVID-19 border closures. The Federal Budget seeks to address this critical issue by including a package of measures to create jobs and support Australia’s regional economic recovery. The package includes:
Continued access to Jobkeeper subsidies (where agribusinesses qualify);
the introduction of new higher education agricultural courses; and
additional support measures including relocation assistance, incentives for young agricultural workers and extension of working holiday visas.
Whilst these changes are welcomed, particularly due to the looming shortage of labour for many regional agribusinesses, the anticipated shortfall in seasonal workers will remain a critical risk to agribusinesses achieving optimal production. Greater domestic Agricultural workforce participation will be critical, particularly whilst international visa extensions are pending and international borders remain closed.
The Federal Budget includes a myriad of targeted programs and measures to address the recent drought, including $2 billion in concessional drought loans provided through the Regional Investment Corporation to assist with drought recovery, as well as increased funding for programs conducted under the Future Drought Fund.
The Federal Budget also extends the On-farm Emergency Water Infrastructure Rebate Scheme by $50 million as a result of consistently high demand for funding under this scheme. A rebate of up to $25,000 can be accessed by farmers to be more resilient for future droughts, increase productivity and mitigate reliance on natural watering points.
However, the Government has discontinued the $100 million Water for Fodder program announced in December 2019. Under that program, it was intended that Adelaide’s desalination plant would produce water, to free-up upstream water supplies in the southern Murray-Darling Basin so that irrigators in that region could grow fodder for livestock.
Accordingly, Agribusinesses should consider their current water infrastructure and management plans to take advantage where possible of the rebates available in the Federal Budget.
Infrastructure investment was a key focus of the Federal Budget with the Government announcing an investment of $14 billion over four years from 2020-21 for new and accelerated projects. However, many regional centres and the agricultural sector may benefit from the additional $3 billion for small scale road safety and the Local Roads and Community Infrastructure Program, aimed to provide better transport links for regional communities and generate local level spending on infrastructure. With the vast majority of Australia’s agricultural enterprises located in regional and remote Australia, enhanced transport infrastructure allows for improvements in productivity and lifestyle amenity.
Furthermore, the Government is building water infrastructure to help increase water security by investing an additional $2 billion towards new water projects under the National Water Infrastructure Development Fund (NWIDF). The NWIDF aims to invest in priority water infrastructure projects to enhance water security and underpin regional economic growth for both agriculture and industry.
An additional $270 million is also being pumped into the Murray-Darling Communities Investment Package. Funding is intended to maximise the benefits for Murray-Darling Basin communities and those reliant on the Murray-Darling Basin. Targeted outcomes include improved river health, establishing stronger compliance and monitoring of water use in the Murray-Darling Basin, and targeted water savings through off-farm infrastructure investment.
Instant asset write off
The Government has increased the thresholds and timing for the instant asset write-off. Businesses with a turnover of up to $500 million can claim an upfront tax deduction for eligible depreciable assets worth up to $150,000 in the year of installation.
Agribusinesses should review their capital expenditure strategies in consultation with their advisors to consider if any capital expenditure and associated funding should be brought forward before 30 June 2022, including new cars, trucks and capital equipment, to benefit from these announced changes.
The Federal Budget announced a commitment of $328 million over four years to boost agricultural exports. Investment is targeted toward reducing red tape and increasing efficiency for export approvals, whilst also helping domestic manufacturer’s access opportunities to expand overseas. Whilst the impact of these changes are yet to be tested, the Federal Budget stated that the Government will “minimise the impost on industry as it recovers from the effects of drought, bushfires and COVID-19”.
Australia exports 71% of our agricultural production and therefore exporters will strongly benefit from the budget measures by reducing congestion for agricultural exports, decreasing costs associated with export accreditation to increase the competitiveness of Australian exports.
Australia’s Agribusiness sector has endured many challenges in its history, with sector participants showing resilience, persistence and adaptability. The Federal Budget announcements for 2020-2021 are positive steps to help Agribusinesses on the pathway to recovery and prosperity.