The Federal Government has released its annual budget and as expected it contained several measures that are designed to assist the recovery of the economy after the abnormal impact of COVID-19. As always, these are proposed measures and need to be passed by Parliament but most of these measures, especially on the tax side, are proposals previously advocated by the Opposition so it is expected these will be passed.
Here is a summary of the key measures of the budget: –
- Planned tax cuts to personal tax rates have been brought forward and will apply from 1 July 2020. The 19% tax threshold will be raised from $37,000 to $45,000 and the 32.5% tax threshold will be raised from $90,000 to $120,000.
- The low income tax offset will be raised from $445 to $700.
- The low and middle income tax offset will continue to be available in the 2021 financial year and will provide a $1,080 maximum offset for taxpayers with incomes between $48,000 to $90,000.
- The instant asset write off has been significantly increased. It is now available to most businesses as the turnover limit has been raised to $5 billion. These businesses can immediately deduct the value of any new asset or improvement which is available to be used by 30 June 2022 that was purchased from Budget night (6th October 2020).
- Businesses with turnovers less than $50 million will also be able to write off immediately any second hand assets purchased in this same time period.
- The current regulations that allow businesses with turnovers under $500 million to immediately deduct second assets costing under $150,000 till 31 December 2020 will still be kept in place and has been extended until 30 June 2021.
- Businesses with turnovers less than $10 million will be able to deduct the entire balance of their pool up to 30 June 2022.
- The company tax loss carry back provisions have been re-introduced and will allow companies in the 2021 and 2022 tax returns to offset losses made in the 2020 – 2022 years with profits made in the 2019 and earlier years. This loss carry back will create a refundable tax offset but the loss brought back cannot exceed earlier profits and must not create a franking account deficit.
- A new JobMaker hiring credit has been introduced to encourage businesses to employ people aged under 35 years of age. From 7 October, employers who hire employees between 16-29 years of age will be to claim $200 per week or $100 per week for those aged 30 to 35 (for a maximum of 52 weeks). The payment will be claimed quarterly in arrears with the main other criteria being it must be a new employee, the employee must work an average of 20 hours per week, the employee must have received JobSeeker for 1 month in the prior 3 month period to commencing employment and the employer must not be receiving JobKeeper payments.
- An increase in the turnover threshold from $10 million to $50 million to access several small business concessions relating to immediate write off of establishment costs, FBT exemptions relating to car parking and portable electronic devices, simplified trading stock rules and the reduction in amendment period for tax returns down to 2 years.
If you would like more details on any of these provisions, please do not hesitate to contact us.