What the 2020/2021 Federal Budget means for you

As expected, Treasurer Frydenberg delivered an unprecedented budget last night. The coronavirus-centric measures focus on job creation and tax cuts which aim to stimulate our weakening economy.  

The government proposes to bring forward cuts to individual tax rates and expand access to small business tax concessions as well as implement a JobMaker hiring credit which will subsidise wages for new employees. 

If the measures are passed in the coming weeks, most businesses will have access to an instant asset write-off for any asset until 30 June 2022; and loss carry-back measures will be available as refunds when companies lodge their 2021 & 2022 tax returns.  

We are pleased to present you with some highlights that will impact you, our valued clients. 

 Individuals

• Individual income tax cuts for the 19% and 32.5% tax brackets will be brought forward two years to 1 July 2020, as will an increase to the low income tax offset. Planned removal of the low and middle income tax offset has been scrapped for one year. 
• The proposed income tax brackets from 1 July 2020 are as follows. 

Business incentives and companies

• Businesses with aggregated annual turnover of up to $5b will be able to deduct the full cost of eligible depreciable assets of any value in the year they are installed. The full expensing period is available from 7:30pm AEDT on 6 October 2020 to 30 June 2022. 
• Small business depreciation pools may have up to 30 June 2022 to write-off their entire balances.  
• Businesses with turnover between $10m and $50m will have access to some existing small business tax concessions. 
• Eligible employers can claim a JobMaker Hiring Credit of up to $200 per week for each additional new job they create for an eligible employee from 7 October 2020 to 6 October 2021. 
• Eligible businesses that employ apprentices or trainees will be entitled to receive up to a 50% wage subsidy, up to $7,000 per quarter, capped at 100,000 places. This new measure will run from 5 October 2020 to 30 September 2021. 
• Eligible companies with turnover up to $5b will be able to offset tax losses against prior year taxed profits to generate a refund. 

Superannuation

• Individuals will keep their existing superannuation fund when they change jobs. Employers will pay super to a new employee’s existing fund rather than creating a new account.

Other measures

• Employer-provided retraining and reskilling for redundant, or soon to be redundant, employees will be exempt from fringe benefits tax. When enacted, the exemption will apply from 2 October 2020. 
• A targeted capital gains tax exemption will apply for granny flat arrangements provided to older Australians or people with disabilities, where there is a formal written agreement in place.  
• The research and development (R&D) tax incentive is proposed to change from 1 July 2021. Small R&D entities to be entitled to an offset of 18.5 percentage points above their tax rate with no refundable limit. Large R&D entities will have intensity tiers reduced from three to two, with offsets of 8.5 and 16.5 percentage points above their tax rate. 

For a detailed Tax and Accounting Overview on the 2020/21 budget click here.

If you would like further information or to book an appointment to discuss the impact on your personal situation please contact us.