Personal tax cuts brought forward to 1 July 2020.
Reduction of tax rates per the following table:
Small business tax concessions extended to medium businesses
Businesses with aggregated turnover between $10M to $50M will be eligible for the following concessions (already available to businesses with aggregated turnover less than $10M).The extension of these concessions to medium businesses will be delivered in three phases:
– From 1 July 2020, eligible businesses will be able to immediately deduct certain start-up expenses and certain prepaid 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 (note that an FBT exemption for retraining redeployed employees will also apply from 2 October 2020).
From 1 July 2021:
– eligible businesses will be able to access the simplified trading stock rules, remit PAYG instalments based on GDP adjusted notional tax, and settle excise duty and excise-equivalent customs duty monthly on eligible goods;
– The time limit for the ATO to amend income tax assessments will be reduced from four to two years for eligible business for income years starting from 1 July 2021; and
– the ATO power to create a simplified accounting method determination for GST purposes will be expanded to apply to businesses below the $50 million aggregated annual turnover threshold.
The eligibility turnover thresholds for other small business tax concessions will remain at their current levels.
Outright capital assets deduction until 30 June 2022 for most businesses
Businesses with aggregated annual turnover of less than $5 billion will be enable to deduct the full cost of eligible capital assets acquired from 7:30pm AEDT on 6 October 2020 (Budget night) and first used or installed by 30 June 2022.
Full expensing in the year of first use will apply to new depreciable assets and the cost of improvements to existing eligible assets. For small and medium sized businesses (with aggregated annual turnover of less than $50 million), full expensing will also apply to second-hand assets.
Businesses with aggregated annual turnover between $50 million and $500 million can still deduct the full cost of eligible second-hand assets costing less than $150,000 that are purchased by 31 December 2020 under the current instant asset write-off rules. Businesses that hold assets eligible for the $150,000 instant asset write-off will have an extra six months (until 30 June 2021), to first use or install such assets.
Small businesses (with aggregated annual turnover of less than $10 million) can deduct the balance of their simplified depreciation pool at the end of the income year while full expensing applies. The provisions which prevent small businesses from re-entering the simplified depreciation regime for five years if they opt-out will continue to be suspended.
Loss carry-back from 2019–2020, 2020–2021 and 2021–2022
The Government will allow eligible companies to carry back tax losses from the 2019–2020, 2020–2021 or 2021–2022 income years to offset previously taxed profits in 2018–2019 or later income years.
Companies with an aggregated turnover of less than $5 billion will be able to apply tax losses against taxed profits in a previous year, generating 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 to not exceed the earlier taxed profits and to not generate a franking account deficit. The tax refund will be available on election by eligible businesses when they lodge their 2020–2021 and 2021–2022 tax returns.
Companies that do not elect to carry back losses under this measure can carry losses forward as normal.
Instant asset write-off: minor change
Given the largesse of the new outright deduction for capital assets until 30 June 2022, the instant asset write-off rules have become temporarily irrelevant for most taxpayers (those with aggregated annual turnover of less than $5 billion).
Accordingly, there were no changes to the rules, other than a slight tweaking for costs relating to second-hand goods acquired by large businesses (with annual aggregated turnover between $50 million and $500 million).
R&D Tax Incentive changes
The Government has announced a number of changes to the R&D tax offset measures contained in the Treasury Laws Amendment (Research and Development Tax Incentive) Bill 2019 and deferred the start date of those measures to income years starting on or after 1 July 2021.
State COVID-19 business support grants: NANE income
The Federal Government announced that the Victorian government’s business support grants for small and medium business will be non-assessable, non-exempt (NANE) income for tax purposes. The Victorian Government announced the grants on 13 September.
Eligibility for this treatment will be limited to grants announced on or after 13 September 2020 and for payments made between 13 September 2020 and 30 June 2021.
JobMaker Hiring Credit
The Budget announced that the Government will provide $4 billion over three years from 2020–2021 to accelerate employment growth by supporting organisations to take on additional employees through a hiring credit. The JobMaker Hiring Credit will be available to eligible employers over 12 months from 7 October 2020 for each additional new job they create for an eligible employee.
Wage subsidy for new apprentices
The Government will provide a capped 50% wage subsidy to businesses who take on a new Australian apprentice from 5 October 2020 to 30 September 2021.
It will be available to employers of any size or industry, Australia-wide, regardless of geographic location or occupation. There are two important caps:
– it is limited to 100,000 new apprentices or trainees in total; and
– the 50% subsidy will be limited to $7,000 per quarter ($28,000 per annum).
More information can be found on the Department of Education, Skills and Employment website. The payment will be paid in respect of commencing or recommencing apprentices; that is, it will be possible to re-employ former apprentices whose employment had been terminated.
The scheme will run from 5 October 2020 to 30 September 2021. The measure was earlier announced by the Prime Minister on 5 October 2020. The Department of Education, Skills and Employment states that the start date for claims is 1 January 2021; that is, payments will be made in arrears.
CGT Exemption For “Granny Flats”
The Budget confirms that the Government will put in place a “targeted” CGT exemption for granny flat arrangements.
Under the measure, CGT will not apply to the creation, variation or termination of a granny flat arrangement providing accommodation where there is a formal written agreement in place. The Budget states that it will apply to arrangements that provide accommodation for “older Australians or those with a disability”. There are no further details as to what constitutes “older” or “disability”.
The exemption will only apply to agreements that are entered into because of “family relationships or other personal ties” and will not apply to commercial rental arrangements.
It is intended that the measure commence from 1 July 2021 (ie next financial year), subject to the passage of necessary legislation.
$250 cash payments for income support recipients.
The Government will pay two $250 economic support payments for eligible income support recipients and concession card holders. The payments will be made from November 2020 and early 2021 to eligible income support recipients and concession card holders, including:
– Age Pension;
– Disability Support Pension;
– Care Payment;
– Family Tax Benefit, including Double Orphan Pension (not in receipt of a primary income support payment);
– Carer Allowance;
– Pensioner Concession Card (PCC) holders (not in receipt of a primary income support payment);
– Commonwealth Seniors Health Card holders; and
– Eligible Veterans’ Affairs payment recipients and concession card holders.
The $250 cash payments are tax exempt and will not count as income support for social security purposes. These cash payments follow the two $750 stimulus payments in April and July 2020 for social security and veteran income support recipients and concession card holders.
Should you have any questions in relation to these changes, please do not hesitate to contact your Harris Black Tax Specialist.