Federal Budget 2020
The Treasurer, Josh Frydenberg has handed down the historic Federal Budget. We have put together a summary of the key initiatives split by Business, Individuals and Superannuation.
JobMaker Hiring Credit
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 credit for up to 12 months from the date the new position is created. The JobMaker Hiring Credit will be claimed quarterly in arrears by the employer from the ATO from 1 February 2021. Employers will need to report quarterly that they meet the eligibility criteria.
Immediate deductions for business investment in capital assets
This includes the following change – Small businesses (i.e., 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 (i.e., up to 30 June 2022).
Changes to how companies can manage losses
The Government has announced that it will introduce measures to allow companies with a turnover of less than $5 billion to carry back losses from the 2020, 2021 or 2022 income years to offset previously taxed profits made in or after the 2019 income year. This will allow such companies to generate a refundable tax offset in the year in which the loss is made. The tax refund is limited by requiring that the amount carried back is not more than the earlier taxed profits and that the carry back does not generate a franking account deficit.
Access to generous tax concessions for a wider range of businesses
The Government has announced that it will expand the concessions available to Medium Sized Entities to provide access to up to ten Small Business Concessions.
FBT exemption for retraining and reskilling employees
From 2 October 2020, the Government will introduce an FBT exemption for retraining and reskilling benefits provided by an employer to redundant, or soon to be redundant, employees, where the benefits may not be related to their current employment (e.g., where an employer retrains a sales assistant in web design in order to redeploy them to an online marketing role in the business).
Reducing the compliance burden of FBT record keeping
The Government will provide the ATO with the power to allow employers to rely on existing corporate records, rather than employee declarations and other prescribed records, to finalise their FBT returns.
Insolvency reforms to support small business
The Government will implement certain insolvency reforms, effective from 1 January 2021 (subject to the passing of legislation) to support small business
Supporting the mental health of Australians in small business – COVID-19 response package
The Government will provide $7 million in 2020/21 to support the mental health and financial wellbeing of small businesses impacted by COVID-19
Personal income tax cuts from 1 July 2020
The Government has announced that it will bring forward changes to the personal income tax rates that were due to apply from 1 July 2022, so that these changes now apply from 1 July 2020 (i.e., from the 2021 income year). These changes involve:
- increasing the upper threshold of the 19% personal income tax bracket from $37,000 to $45,000; and
- increasing the upper threshold of the 32.5% personal income tax bracket from $90,000 to $120,000.
These changes are illustrated in the following table (which excludes the Medicare Levy).
|Rate||Current (2019 to 2022)||Proposed (2021 – 2024)*|
|0%||0 – $18,200||0 – $18,200|
|19%||$18,201 – $37,000||$18,201 – $45,000|
|32.5%||$37,001 – $90,000||$45,001 – $120,000|
|37%||$90,001 – $180,000||$120,001 – $180,000|
*The Government advised that the personal income tax rate changes that have already been legislated, effective from 1 July 2024 (i.e., from the 2025 income year), remain unchanged. These involve abolishing the 37% personal income tax bracket, reducing the 32.5% personal income tax bracket to 30%, and increasing the upper threshold of the reduced 30% tax bracket from $120,000 to $200,000.
Removing CGT for ‘granny flat arrangements’
A targeted CGT exemption will apply from 1 July 2021 (subject to the passing of legislation), for ‘granny flat arrangements’. Broadly, these involve older Australians or people with disabilities transferring their home or the proceeds from the sale of their home (and/or other assets) to their adult children or other trusted persons in return for the promise of ongoing housing and care. Under this exemption, CGT will not apply to the creation, variation or termination of a formal written granny flat arrangement providing accommodation for older Australians or people with disabilities.
The Government will provide $159.6 million over four years from 2020/21 to implement reforms to improve outcomes for superannuation fund members.
From 1 July 2021, the proposed reforms will make the system better for members in four key ways:
• Your superannuation follows you
• Empowering members – A new, interactive, online YourSuper comparison tool will help members decide which super product best meets their needs.
• Holding funds to account for underperformance
• Increased accountability and transparency
If you have any questions around any of the initiatives please reach out.