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2020/21 Federal Budget Released

7 October 2020

Last night the Federal Government released the 2020-21 Budget “The Economic Recovery Plan for Australia”.  The Budget was focused on providing a response to the economic impact of the COVID-19 pandemic. Today we look into the Budget to decipher what it means for our clients.

Individuals

Bringing forward the Personal Income Tax Plan and retaining the middle-income tax offset

  • The Government intends to bring forward the second stage of  their Personal Income Tax Plan by two years to 1 July 2020. This second stage involves three tax changes:
    • The top threshold of the 19 per cent personal income tax bracket will increase from $37,000 to $45,000.
    • The low-income tax offset (LITO) will increase from $445 to $700.
    • The top threshold of the 32.5 per cent personal income tax bracket will increase from $90,000 to $120,000.
    • The Government also intends to retain the low and middle income tax offset (LMITO) for the 2020-21 income year, this was due to be removed at the commencement of the second stage of the Personal Income Tax Plan. The LMITO provides low and middle income taxpayers with a tax benefit of up to $1080. 

Business

Increasing and expanding access to the instant asset write off

The Government has proposed support for businesses with aggregated annual turnover of less than $5 billion by enabling them to deduct the full cost of eligible depreciating assets acquired from 7:30pm AEDT on 6 October 2020 (Budget night) and first used or installed by 30 June 2022. (Please note that we have not received confirmation of what will be eligible an asset).

Small business entities (aggregated turnover of less than $10 million) will also be able to deduct the full balance of their small business depreciation general pool.

 

Small business entities

Medium business entities

Larger business entities

Other qualifying business entities

Aggregated annual turnover

< $10 million

> $10 million to

< $50 million

> $50 million to

< $500 million

> $500 million to

< $5 billion

First used or installed by

By 30 June 2022

Application to second-hand assets

Yes

Yes

No

No

As part of the changes to the instant asset write off, the Government is proposing to extend the period in which a small or medium business first uses an asset from 31 December 2020 to 30 June 2021 for the purposes of the existing IAWO. This means that businesses that acquired eligible assets for the existing $150,000 IAWO will have an extra six months, until 31 June 2021, to first use or install those assets. 

Based on draft legislation introduced into the House of Representatives today (in the form of Treasury Laws Amendment (A Tax Plan for the COVID-19 Economic Recovery) Bill 2020) we understand that there will be further rules regarding what is an eligible asset, and rules around when an asset will be taken to have acquired. We will provide further information on the conditions for accessing the extended instant asset write off measures in due course.

Increasing the small business entity turnover threshold

The Government is proposing to expand access to a range of small business tax concessions by increasing the small business entity turnover threshold for these concessions from $10 million to $50 million. For the first time eligible businesses, with an aggregated turnover over $10 million but below $50 million, will access up to ten concessions, including:

Concession

Proposed start date

Immediate deduction for certain start-up expenses

1 July 2020

Immediate deduction for certain pre-paid expenditure

1 July 2020

FBT exemption for car parking benefits

1 April 2021

Simplified trading stock rules

1 July 2021

Remit PAYG instalments based on GDP-adjusted notional tax

1 July 2021

Settle exercise duty monthly on eligible goods

1 July 2021

Two-year amendment period

1 July 2021

Simplified accounting period determination for GST purposes

1 July 2021

Temporary loss carry-back measures

The Government will allow companies with turnover up to $5 billion to offset tax losses against previous profits on which tax has been paid to generate a refund. Losses incurred in 2019–20, 2020–21 and/or 2021–22 can be carried back against profits made in or after 2018–19.

Eligible companies may elect to receive a tax refund when they lodge their 2020–21 and 2021–22 tax returns.

Superannuation

From 1 July 2021, employees will keep their super fund when they change jobs even where they may not have exercised a super choice. Under the current law, where an employee does not exercise a super choice, the employee has their super contributed to the employer’s default fund. This proposal is intended to stop the creation of unintended multiple super accounts where an employee does not make a super choice and the erosion of an employee’s super balance as a result of having multiple accounts with additional fees.

Non-tax related measures

Boosting apprenticeship wage subsidy

The Government will provide $1.2 billion over four years from 2020-21 to increase the number of apprentices and trainees employed.

From 5 October 2020 to 30 September 2021, businesses of any size can claim the new Boosting Apprentices Wage Subsidy for new apprentices or trainees who commence during this period. Eligible businesses will be reimbursed up to 50 per cent of an apprentice or trainee’s wages worth up to $7,000 per quarter, capped at 100,000 places.

JobMaker Hiring Credit

The JobMaker Hiring Credit will be available to employers for each additional new job they create for an eligible employee over the next 12 months from 7 October 2020.

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 JobMaker Hiring Credit for up to 12 months from the date the new position is created.

To be eligible, the employee will need to have worked for a minimum of 20 hours per week, averaged over a quarter, and received the JobSeeker. Payment, Youth Allowance (other) or Parenting Payment for at least one month out of the three months prior to when they are hired.

For further information, please refer to the factsheets available from the Budget website, or contact your local Boyce accountant.

Please note that the budget measures still must be legislated. We are aware that the government intends to introduce draft legislation as soon as possible however at the time of this E-Alert we had not had a chance to review it.  

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