The government has handed down the widely anticipated 2020/21 budget, outlining its plans to help rebuild Australia post-pandemic.
From the $98bn of spending and business concessions outlined; here’s what we believe are the stand out announcements impacting small and medium business:
Uncapped Immediate Asset Write Off
Businesses with an aggregated annual turnover of less than $5 billion will be able to claim an immediate deduction for the full (uncapped) cost of an eligible depreciable asset, in the year the asset is first used or is installed ready for use, where the following requirements are satisfied:
- The asset was acquired from 7:30pm AEDT on 6 October 2020 (i.e., Budget night).
- The asset was first used or installed ready for use by 30 June 2022.
- The asset is a new depreciable asset or is the cost of an improvement to an existing eligible asset,
Small and medium sized businesses with an annual turnover of less than $50 million will also be able to fully expense second-hand assets; as opposed to new assets only.
Temporary Loss Carry-Back Provisions
Companies with turnover of up to $5 billion will now be able to carry back tax losses from the 2019-20, 2020-21, or 2021-22 income years to offset previously taxed profits in 2018-19 or later income years.
This will allow such companies to generate a refundable tax offset in the year in which the loss is made.
The tax refund will be limited by requiring that the amount carried back is not more than the earlier taxed profits and that the carry back does not generate a franking account deficit.
Reduction in personal tax rates
The Government has announced that it will bring forward changes to the personal income tax rates that were due to apply from 1 July 2022, so that these changes now apply from 1 July 2020 (i.e., from the 2021 income year). These changes involve:
- Increasing the upper threshold of the 19% personal income tax bracket from $37,000 to $45,000; and
- Increasing the upper threshold of the 32.5% personal income tax bracket from $90,000 to $120,000.
JobMaker Hiring Credit
The Government will introduce a JobMaker Hiring Credit to incentivise businesses to take on additional young job seekers.
From 7 October 2020, eligible employers will be able to claim $200 a week for each additional eligible employee they hire aged 16 to 29 years old and $100 a week for each additional eligible employee aged 30 to 35 years old. New jobs created until 6 October 2021 will attract the credit for up to 12 months from the date the new position is created.