[vc_row][vc_column][vc_column_text]FEDERAL BUDGET | OCTOBER 2020
Please see below our Federal Budget update.
Personal Income Tax Changes
The Government announced the following changes to the thresholds for personal income tax rates and the low-income tax offset (“LITO”) for Australian residents for the 2021 income year:
- the LITO will be increased from $445 to $700,
- the top threshold of the 19% personal income tax bracket will increase from $37,000 to $45,000; and
- the top threshold of the 32.5% personal income tax bracket will increase from $90,000 to $120,000.
The following tax rates for the 2020–21 income year for individuals who are Australian residents will be as follows:[/vc_column_text][mk_padding_divider size=”20″][mk_table style=”style2″ el_class=”table-left-text”]
| Taxable Income | Tax on this Income |
|---|---|
| 0 to $18,200 | Nil |
| $18,201 to $45,000 | 19cents for each $1 over $18,200 |
| $45,001 to $120,000 | $5,092 plus 32.5cents for each $1 over $45,000 |
| $120,001 to $180,000 | $29,467 plus 37cents for each $1 over $120,000 |
| $180,001 and over | $51,667 plus 45cents for each $1 over $180,000 |
[/mk_table][mk_padding_divider size=”20″][vc_column_text]Increase in the small business turnover threshold
The Government is extending certain small business concessions, currently available to small business entities with an aggregated turnover of $10 million, to those with an aggregated turnover of less than $50 million.
The tax concessions will apply from 1 July 2020 or 1 July 2021, and the FBT related exemptions will apply for eligible businesses in respect of benefits provided on or after 1 April 2021.
The following is a summary of the applicable concessions available for these newly eligible businesses:[/vc_column_text][mk_padding_divider size=”20″][mk_table style=”style2″ el_class=”table-left-text”]
| Concession | Start Date |
|---|---|
| 0 to $18,200 | Nil |
| Immediate deduction for certain start-up expenses | 1 July 2020 |
| Immediate deduction for certain prepaid expenditure | 1 July 2020 |
| FBT exemption for car parking benefits | 1 April 2021 |
| FBT exemption for multiple work-related portable electronic devices | 1 April 2021 |
| Simplified trading stock rules | 1 July 2021 |
| Remit PAYG instalments based on GDP-adjusted notional tax | 1 July 2021 |
| Settle excise duty monthly on eligible goods | 1 July 2021 |
| Settle excise-equivalent customs duty monthly on eligible goods | 1 July 2021 |
| Two-year amendment period | 1 July 2021 |
| Simplified accounting method determination for GST purposes | 1 July 2021 |
[/mk_table][mk_padding_divider size=”20″][vc_column_text]Company Losses Carry Back
Eligible corporate entities (companies with a turnover of less than $5 billion) that paid corporate income tax in any of the 2019 to 2021 income years and that have subsequently made tax losses in any of the 2020 to 2022 income years can claim a refundable tax offset in their 2021 and 2022 income tax returns up to the amount of their previous income tax liabilities under the new measures.
The amount of the refund is limited to the corporate entity’s income tax liabilities in the relevant gain years and its franking account balance at the end of the year in which the company files its tax return claiming the loss carry back tax offset.
Jobmaker Hiring Credit
A new incentive for businesses to employ additional young job seekers called the JobMaker Hiring Credit has been proposed. The JobMaker Hiring Credit will be administered by the ATO.
Eligible employers will have access to a JobMaker Hiring Credit for each new job they create over the 12 months from 7 October 2020, for which they hire an eligible employee, for a maximum claim period of 12 months from their employment start date.
The JobMaker Hiring Credit will be:
- $200 per week for each eligible employee aged 16 to 29; and
- $100 per week for each eligible employee aged 30 to 35.
An employer cannot claim JobKeeper and JobMaker Hiring Credit at the same time.
Eligible employees must have worked an average of at least 20 hours per week over the quarter for the employer to qualify.
New employees must be in receipt of income support payments (such as JobSeeker Payment, Youth Allowance (Other), or Parenting Payment) for at least one of the three months before they were hired.
Further extension of the instant asset write off
Eligible businesses with an aggregated turnover of less than $5 billion will be able to deduct the full cost of new eligible depreciating assets that are first held, and first used or installed ready for use for a taxable purpose, between 7:30pm AEDT on 6 October 2020 and 30 June 2022.
For small and medium sized businesses (with aggregated turnover of less than $50 million), full expensing also applies to eligible second-hand assets.
Businesses will also be able to deduct the full cost of improvements made during this period to depreciating assets, whether those assets were acquired before or after the 2020 Budget time.
The measure will also extend the time by which assets that qualify for the existing enhanced instant asset write-off incentive that applies to small and medium sized businesses must be first used or installed ready for use for a taxable purpose by 6 months, to 30 June 2021.
Small businesses (with aggregated turnover of less than $10 million) will be able to deduct the balance of their simplified depreciation pool at the end of the income year while full expensing applies.
R&D Changes
Small R&D entities (turnover of less than $20 million) will be able to access the refundable tax offset at a premium of 18.5% points above their corporate tax rate from 1 July 2021. The Government also confirmed that it will not be legislating the proposed $4m cap on annual cash refunds for small R&D entities.
For larger companies (turnover of greater than $20 million) the Government will reduce the number of R&D intensity tiers from 3 to 2 as follows:[/vc_column_text][mk_padding_divider size=”20″][mk_table style=”style2″ el_class=”table-left-text”]
| R&D Intensity Rate | R&D Tax Offset Premium |
|---|---|
| 0 to 2% |
|
| More than 2% |
|
[/mk_table][mk_padding_divider size=”20″][vc_column_text]FBT
New Exemption
There will be an exemption from FBT for employers who provide retraining and reskilling benefits to redundant, or soon to be made redundant, employees where the benefit is not related to their current role.
Simplified Record Keeping
Commencing from 1 April of the FBT year after the date of Royal Assent, employers will be allowed to rely on their existing records, rather than employee declarations and other prescribed records, to finalize their FBT returns.
CGT
There will be a new CGT exemption available for granny flats where there is a formal agreement in place between the home owner and the person residing in the accommodation.
The exemption will not apply to properties that are not the principal home of the taxpayer.
Superannuation
Changes announced include:
- giving members access to a new interactive online Your Super comparison tool to increase competition amongst funds for member’s savings;
- require superannuation products meet an annual objective performance test. Persistently underperforming products will be prevented from taking on new members; and
- further increases to trustee accountability measures.
GST
Businesses with an annual turnover of between $10 million and $50 million will now have access to the simplified accounting method determination for GST.
This method allows entities to estimate the proportion of their sales and purchases of trading stock that are GST-free.
Additional Support Measures
In addition to the above announcements in last night’s Budget, the Government has previously released the following support measures for businesses in these challenging times:
Consumer Credit Reform
Changes to the Credit Act are intended to make lending easier.
A key feature of the new obligations will be allowing lenders to rely on the information provided by borrowers, unless there are reasonable grounds to suspect it is unreliable. Borrowers will be made more accountable for providing accurate information to inform lending decisions, replacing the current practice of ‘lender beware’ with a ‘borrower responsibility’ principle.
See following link.[/vc_column_text][mk_button dimension=”flat” size=”medium” url=”https://ministers.treasury.gov.au/sites/ministers.treasury.gov.au/files/2020-09/Consumer-credit-reforms-fact-sheet.pdf” target=”_blank” margin_top=”10″ margin_bottom=”40″ btn_hover_bg=”#c4b097″]Click here[/mk_button][mk_padding_divider size=”20″][vc_column_text]Insolvency Reform
More detail is available on the insolvency reforms previously announced enabling eligible small businesses to stay in control while entering into Debt Arrangements.
See the following link.[/vc_column_text][mk_button dimension=”flat” size=”medium” url=”https://ministers.treasury.gov.au/sites/ministers.treasury.gov.au/files/2020-09/Insolvency-Reforms-fact-sheet.pdf” target=”_blank” margin_top=”10″ margin_bottom=”40″ btn_hover_bg=”#c4b097″]Click here[/mk_button][mk_padding_divider size=”20″][vc_column_text]Important: This is not advice. Clients should not act solely on the basis of the material contained in this Bulletin. Items herein are general comments only and do not constitute or convey advice per se. Also changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas. The Bulletin is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our prior approval.[/vc_column_text][mk_padding_divider][/vc_column][/vc_row]
