Infrastructure, manufacturing and energy: Mid-market Budget outcomes

Beyond cost of living measures, tonight’s Federal Budget includes a number of announcements to which larger business operators will be paying close attention.

Tonight, the Federal Government announced its first Budget, delivering initiatives that would support the health and wellbeing of Australians without forcing inflationary pressures higher.

For larger or growing businesses, investments in infrastructure, boosts to manufacturing, reforming Australia’s energy supply and extending the ATO’s capabilities to address tax avoidance are all big ticket items not to be missed.

Nearly $10 billion in infrastructure spending

The Government has allocated an immediate $9.7 billion for infrastructure projects around Australia in the next four years, with a total of more than $120 billion of investment allocated to transport infrastructure over the next 10 years.

Current projects include (but aren’t restricted to):

• $3.1 billion in new commitments to deliver the $3.6 billion Melbourne Intermodal Terminal Package (VIC);
• $1.6 billion for the Brisbane to the Sunshine Coast (Beerwah-Maroochydore) rail extension (QLD)
• $1.1 billion for the Brisbane to the Gold Coast (Kuraby – Beenleigh) faster rail upgrade (QLD)
• $1 billion for the Sydney to Newcastle – (Tuggerah to Wyong) faster rail upgrade (NSW)

The Government is also committing an additional $880 million to the “Roads of Strategic Importance” (or ROSI) initiatives and $500 million for the Local Roads and Community Infrastructure program, enabling local councils across Australia to deliver priority projects to quickly stimulate local economies.

$22 billion in infrastructure savings

As expected, the Government’s infrastructure announcements are much smaller in scale than those of recent years.

As well as being ‘lower’ in spend, the new Federal Budget for 2022-23 also includes $22 billion in “savings,” which will largely come from the abolishment of what the Government is calling “rorts and waste” projects – infrastructure projects from the previous budget that they deem to be without merit, or impossible to deliver.

For example, $9.3 billion has been cut from previously announced Coalition infrastructure investments including commuter carparks and the urban congestion fund.

Instead, those funds will be redirected to Victoria for the Suburban Rail Loop, $2.1 billion for projects in QLD, $1.4 billion for NSW projects, and smaller amounts for other states.

$135.5 million in manufacturing incentives

Significant investments in local manufacturing incentives were announced, with $135.5 million over the next four years to support manufacturing and upskill the manufacturing sector workforce. This includes:

• $113.6 million to support local industry to secure and support new jobs and strengthen key domestic manufacturing capabilities in regional areas.
• $14.2 million to develop a National Rail Manufacturing Plan to ensure more trains are built in Australia, support skilled manufacturing and expand the local rail industry
• $6.1 million to help consumers choose ethically sourced Australian textile, clothing and footwear products
• $1.6 million to implement Mandatory Country of Origin Labelling to support the Australian seafood industry.\

Energy and connectivity investment

For regional businesses, the Government has committed to modernising the electricity grid to help put downward pressure on power prices and support the transformation to a clean energy future by introducing 10,000 new transmission lines to the electricity grid. In addition, the $1.9 billion Powering the Regions Fund will help regional Australians access the economic opportunities of decarbonisation.

When it comes to digital connectivity, a much welcome incentive by regional businesses is the $2.4 billion allocation to extend NBN fibre access to 1.5 million more premises and a further $1.2 billion for the Better Connectivity for Regional and Rural Australia Plan.

In a survey conducted by MYOB, participants noted that unreliable internet is a barrier in the adoption of digital tools, with 28 percent saying challenges in accessing NBN, or a stable internet connection, prevent them from using digital tools.

Multinational tax scrutiny for Budget repair

The Government has set its sights on multinational corporations who have previously benefitted from lax laws and loopholes relating to their taxable income.

The Government is closing these loopholes to ensure multinationals pay their fair share of tax in Australia and are improving integrity through higher levels of tax compliance.

This includes a Multinational Tax Integrity package which is set to raise around $1 billion in revenue over the next four years, as well as an extension of compliance programs for tax avoidance, shadow economy and personal income tax which will raise a further $3.7 billion during the same time period.

In addition, the introduction of an anti-avoidance rule has been designed to prevent significant global entities with global revenue of at least $1 billion, from claiming tax deductions for payments made directly or indirectly to related parties in relation to intangibles held in low or no-tax jurisdictions.

To assist with transparency, the Government is introducing stricter digital reporting requirements for all relevant companies.

From next year, the Government will require:

• Large multinationals, defined as significant global entities, to prepare for public release of certain tax information on a country-by-country basis and a statement on their approach to taxation, for disclosure by the ATO
• Australian public companies (listed and unlisted) to disclose information on the number of subsidiaries and their country of tax domicile
• Tenderers for Australian Government contracts worth more than $200,000 to disclose their country of tax domicile (by supplying their ultimate head entity’s country of tax residence)

For more Federal Budget coverage, click here.