The Treasurer, Josh Frydenberg has handed down the Federal Budget. We have put together a summary of the key initiatives split by Business, Individuals and Superannuation.

Business

Temporary full expensing extension

Businesses with an aggregated turnover of less than $5 billion will be able to continue to fully expense the cost of new depreciable assets and the cost of improvements to existing eligible assets in the first year of use. Date of effect – Assets acquired from 7:30pm AEDT on 6 October 2020 and first used or installed ready for use by 30 June 2023

Temporary loss-carry back extension

Companies with an aggregated turnover of less than $5 billion will be able to carry back losses from the 2019-20, 2020-21, 2021-22 and 2022-23 income years to offset previously taxed profits in the 2018-19, 2019-20, 2020-21 and 2021-22 income years. Under this measure tax losses can be applied against taxed profits in a previous year, generating a refundable tax offset in the year in which the loss is made.

New avenue for small business to ‘pause’ ATO debt recovery

Small businesses with an aggregated turnover of less than $10 million per year will be able to apply to the  Small Business Taxation Division of the Administrative Appeals Tribunal (AAT) to pause or modify ATO debt recovery action until their underlying case is decided.

Apprenticeship scheme uncapped

From 5 October 2020 to 31 March 2022, businesses of any size can claim the Boosting Apprenticeship Commencements wage subsidy for new apprentices or trainees who commence during this period. Eligible businesses will be reimbursed up to 50% of an apprentice or trainee’s wages of up to $7,000 per quarter for 12 months.

Tax exemption for storm and flood grants for SMEs and primary producers

Qualifying grants made to primary producers and small businesses affected by the storms and floods will be non-assessable non-exempt income for tax purposes.

Heavy road vehicle charge increase

The Heavy Vehicle Road User Charge will increase from 25.8 cents per litre to 26.4 cents per litre from 1 July 2021.

Tax & investment incentives for the digital economy

The Government has committed to a series of tax incentives to support digital technologies:

• Digital games tax offset
• Self-assessment of the effective life of certain intangible assets
• Review of venture capital tax incentives

Employee share scheme simplification

The Government has moved to simplify employee share schemes and make them more attractive by removing the cessation of employment taxing point for tax-deferred Employee Share Schemes (ESS).

Date of effect – ESS interests issued from the first income year after Royal Assent of the enabling legislation.

$450 per month threshold for super guarantee eligibility removed

Currently, employees need to earn $450 per month to be eligible to be paid the superannuation guarantee. This threshold will be removed so all employees will be paid super guarantee regardless of their income earned. Date of effect – The first financial year after Royal Assent of the enabling legislation. Expected to be 1 July 2022

Individuals

Low and middle income tax offset extended

Low and Middle Income Tax Offset (LMITO) will be extended for another year. The LMITO provides a reduction in tax of up to $1,080 for individuals with a taxable income of up to $126,000 and will be retained for the 2021-22 year. Date of effect – From 1 July 2021 to 30 June 2022

Residency tests rewrite

The Government will replace the individual tax residency rules with a new, modernised framework. The primary test will be a simple ‘bright line’ test – a person who is physically present in Australia for 183 days or more in any income year will be an Australian tax resident. Date of effect – The first income year after the date of Royal Assent of the enabling legislation.

$250 self-education expense reduction removed

The current limitation for claiming a self-education expense, where the first $250 of the allowable deduction is denied, will be removed.

Underwriting home ownership

The Government has announced new and expanded programs to assist Australians to buy a home.

Medicare levy low income threshold

The Government will increase the Medicare levy low-income thresholds for singles, families, and seniors and pensioners from 1 July 2020 to take account of recent movements in the CPI so that low-income taxpayers generally continue to be exempt from paying the Medicare levy.

JobTrainer extended

The Government has committed an additional $500 million to extend the JobTrainer Fund by a further 163,000 places and extend the program until 31 December 2022

Superannuation

Work test repealed for voluntary superannuation contributions

Individuals aged 67 to 74 years will be able to make or receive non-concessional or salary sacrifice superannuation contributions without meeting the work test. The contributions are subject to existing contribution caps and include contributions under the bring-forward rule.

Expanded access to ‘downsizer’ contributions from sale of family home

The eligibility age to access downsizer contributions will decrease from 65 years of age to 60.

SMSF residency tests relaxed

The residency rules for Self Managed Superannuation Funds (SMSFs) and small APRA regulated funds (SAFs) will be relaxed by extending the central control and management test safe harbour from two to five years for SMSFs, and removing the active member test for both fund types.

SMSF legacy product conversions

Individuals will be able to exit a specified range of legacy retirement products, together with any associated reserves, for a two-year period.

Technical changes to First Home Super Saver Scheme

Technical changes will be made to the First Home Super Saver Scheme to reduce errors and streamline applications.

If you have any questions around any of the initiatives please reach out.