The 2020 Federal Budget
Federal Budget Key Announcements
The delayed Federal Budget was announced last night. Here’s a summary of the key announcements in the Budget (and in the days leading up) relating to income tax and business. As always, these are only announcements at this stage and are subject to change before being legislated.
- Personal income tax cuts – the cuts previously scheduled for 1/7/2022 will be bought forward to 1/7/2020. This will increase the 19% tax threshold from $37,000 to $45,000 and the 32.5% threshold from $90,000 to $120,000.
The Low Income Tax Offset will increase from $445 to $700.
- The Low and Middle Income Tax Offset (up to $1,080) which was meant to cease when the income tax cuts came in, will be retained for the 2020/21 financial year.
- Immediate Depreciation Deductions for assets acquired and first installed for use between 6/10/2020 and 30/6/2022. For business with turnover up to $50m, this will apply to new and second hand assets, for business over $50m but less than $5b this will apply to new assets only. This applies to assets of any value. Furthermore, small business entities with annual turnover of less than $10m will be able to write off the balance of the small business depreciation pool during this period.
- FBT Exemption for Retraining – from 6/10/2020 there will be a Fringe Benefits Tax exemption for employers providing retraining and reskilling benefits to redundant, or soon to be redundant, employees.
- Grants from the Victorian State Government under the Business Resilience Package announced on the 13th September 2020 will be free from income tax to the entity which receives the grant.
- Temporary loss carry-back for companies with turnover under $5 billion. Losses made in the 2019/20, 2020/21 or 2021/22 years can be offset against taxed profits made in 2018/19 or later financial years, with tax paid in those years able to be claimed back. The first year this election can be made is when lodging the 2020/21 tax return. The amount that can be claimed back is limited to the balance of the franking account of the company.
- Apprentice Subsidy. Businesses of any size can claim the subsidy for any new or recommencing apprentices and trainees between 5/10/2020 and 30/9/2021. The subsidy will be 50% of the wage, up to maximum $7,000 per quarter and is capped to 100,000 places.
- JobMaker Hiring Credit of $200 per week for employees aged 16 to 29 and $100 for employees aged 30 to 35, for a maximum of 12 months. This will only be available for additional jobs so the employer must be able to show an increase in the number of employees and the overall payroll as compared to 30th September 2020. Employers cannot claim both JobKeeper and the new JobMaker at the same time. The claim must be in relation to an eligible employee, which requires the employee to:
- Be within the relevant age range
- Work at least 20 hours per week on average
- Commence employment between 7/10/2020 and 6/10/2021
- Have received JobSeeker, Youth Allowance or Parenting Payment for at least one month in the past three months before they were hired
- Claims will be paid quarterly in arrears, with claims opening 1 February 2021. Employers will be required to report quarterly that they meet the eligibility criteria.
- The threshold for access to certain small business concessions will be lifted from $10m turnover to $50m. This will increase the number of businesses that can access, among other things, immediate deductions for certain start-up expenses and pre-paid expenses, FBT exemption for car parking and multiple work-related portable electronic devices, simplified trading stock rules and two year amendment periods.
- Capital Gains Tax exemption for granny flats where a formal written agreement is entered into and the tenant is an older Australian with a disability.
Navigating your way through the announcements and how they apply to you can be complicated.
If you have any queries, please email: firstname.lastname@example.org or contact your Accountant directly via email and we will be in touch.
Patrick Rowan & Associates