The Federal Budget delivered by the Treasurer Josh Frydenberg reflects an unprecedented spending program and will result in an anticipated Budget deficit in 2020-21 of $214 billion.
Big Benefits for Business
- Stage 2 personal income tax cuts to be brought forward from 1 July 2022 to 1 July 2020.
- Increasing the small business entity threshold from $10 million to $50 million.
- All businesses with turnover of less than $5 billion can write off the full value of eligible assets used or installed until 30 June 2022.
- Companies with turnover of less than $5 billion can carry back losses incurred in the 2019-20 to 2021-22 years.
- New JobMaker Hiring Credit measure to encourage employers to hire young workers.
- Research & Development (R&D) tax incentives introduced.
- Government to invest additional $14 billion in new and accelerated infrastructure projects over the next four years.
- Record funding for hospitals, schools, childcare, aged care and disability services.
- Aged care funding up $2.2 billion, including $1.6 billion for 23,000 additional home care packages.
Tax Relief for Individuals
The Government will bring forward changes to the Personal Income Tax Plan by two years. From 1 July 2020:
- the Low Income Tax Offset (LITO) will increase from $445 to $700;
- the top threshold of the 19% tax bracket will increase from $37,000 to $45,000; and
- the top threshold of the 32.5% tax bracket will increase from $90,000 to $120,000.
In 2020-21, low-and middle-income earners will receive a one-off additional benefit of up to $1,080 from the low and middle income tax offset (LMITO). More than 7 million individuals are expected to receive tax relief of $2,000 or more for the 2020-21 income year compared with 2017-18 tax settings. Low and middle income tax payers will receive relief of up to $2,745 for singles and $5,490 for dual income families.
Tax Relief for Business
Businesses with a turnover of up to $5 billion will be able to immediately deduct the full cost of eligible depreciable assets acquired from 7:30pm (AEDT) on 6 October 2020 and first used or installed by 30 June 2022.
The Government will temporarily allow companies with a turnover of up to $5 billion to offset tax losses against previous profits on which tax has been paid. Losses incurred up to June 2022 can be offset against prior profits made in or after the 2018-19 financial year.
The Budget provides $105 million in tax relief to expand access to a range of small business tax concessions by lifting the aggregated annual turnover threshold for these concessions.
Businesses with an aggregated annual turnover between $10 million and $50 million will be able to access up to ten small business tax concessions. The expanded concessions will apply in three phases, with the first phase starting from 1 July 2020.
The Government will also enhance previously announced reforms to invest an additional $2 billion through the Research and Development Tax Incentive. These changes will commence from 1 July 2021 and help more than 11,400 companies that invest in research and development.
Expanding Access to Small Business Tax Concessions
Access to a range of small business tax concessions will be expanded by increasing the small business entity turnover threshold for up to 10 concessions from $10 million to $50 million.
The expanded concessions will apply over three phases:
From 1 July 2020, eligible businesses will be able to immediately deduct certain start-up expenses and certain pre-paid expenditure.
From 1 April 2021, eligible businesses will be exempt from the 47% FBT on car parking and multiple work related portable electronic devices, such as phones or laptops provided to employees.
From 1 July 2021: eligible businesses will be able to:
- access the simplified trading stock rules that do not require annual stocktakes or to account for changes in trading stock values
- remit PAYG instalments based on GDP adjusted notional tax
- if they are a brewer or distiller, be able to report and pay excise duty and excise equivalent customs duty monthly on eligible goods, rather than weekly
- be exposed to a reduced two year (currently four year) tax assessment amendment period
- ATO will have the power to create a simplified accounting method for GST purposes
Temporary Loss Carry-Back for Companies
Companies with an aggregated annual turnover of less than $5 billion will be able to carry back tax losses from 2019-20, 2020-21 or 2021-22 income years to offset previously taxed profits in the 2018-19 or later income years.
Eligible corporate tax entities can elect to apply tax losses against taxed profit in a previous year, generating a refundable tax offset in the year in which the loss is made. The tax refund is limited by requiring that the amount carried back is not more than the earlier taxed profit, and cannot result in a franking account deficit.
The tax refund will be available on election by eligible companies when they lodge their 2020 -21 and 2021-22 income tax returns.
The current FBT exemption for small business car parking fringe benefits will be expanded to included businesses with an aggregated annual turnover between $10 million to $50 million.
From 1 April 2021, eligible businesses will be exempt from FBT on car parking if the car parking is not provided in a commercial car park, where aggregated turnover is less than $50 million.
Employer Provided Retraining
From 2 October 2020, an FBT exemption will be available for certain employer provided retraining and reskilling where it is provided to redundant or soon to be redundant employees where the benefits may not be related to their current employment.
JobMaker Hiring Credit
Eligible employers can claim a JobMaker Hiring Credit for each additional new job they create for an eligible employee from 7 October 2020 to 6 October 2021.
The JobMaker Hiring Credit will be available from the date of employment for up to 12 months and capped at $10,400 for each additional new position created. Eligible employers will receive $200 per week if they hire an eligible employee aged 16 to 29 years, or $100 per week if they hire an eligible employee aged 30 to 35 years.
There are specific “additionality criteria” to be met to be an eligible employer, including demonstrating that there is an increase in the total employee headcount and payroll of the business. Other employer eligibility criteria include being registered for PAYG withholding and reporting through Single Touch Payroll. Employers do not need to satisfy a fall in turnover test. The Jobmaker Hiring Credit will also not be available to employers who are claiming the JobKeeper payment.
The employee must have worked at least 20 hours per week, averaged over a quarter and received the JobSeeker Payment, Youth Allowance (Other) or Parenting Payment for at least one month out of the three months before they were hired.
The credit will be available for each additional new job created for an eligible employee from 7 October 2020 until 6 October 2021. It will be claimed quarterly in arrears from the ATO starting from 1 February 2021.
Apprenticeships Wage Subsidy
From 5 October 2020 to 30 September 2021, businesses of any size will be able to claim a new Boosting Apprentices Wage Subsidy for new apprentices or trainees who commence during this period, capped at 100,000 places.
Eligible businesses will be reimbursed up to 50% of an apprentice or trainee’s wages worth up to $7,000 per quarter, per eligible apprentice of trainee.
Commencing 1 July 2021, the Your Future, Your Super package will improve the superannuation system by:
- Having your superannuation follow you: preventing the creation of unintended multiple superannuation accounts when employees change jobs.
- Making it easier to choose a better fund: members will have access to a new interactive online YourSuper comparison tool which will encourage funds to compete harder for members’ savings.
- Holding funds to account for underperformance: to protect members from poor outcomes and encourage funds to lower costs the Government will require superannuation products to meet an annual objective performance test. Those that fail will be required to inform members.
- Increasing transparency and accountability: the Government will increase trustee accountability by strengthening their obligations to ensure trustees only act in the best financial interests of members. The Government will also require superannuation funds to provide better information regarding how they manage and spend members’ money in advance of Annual Members’ Meetings.
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