The Budget announced on Tuesday night proposed something for almost everyone.

Want to know what’s in it for you and your business? We’ve summarised it below.

Tax cuts

The big-ticket item announced on Tuesday is tax cuts for low to middle income earners. The 19% tax rate threshold has been raised from $37,000 (table 1) to $45,000 (table 2). Similarly, the threshold for the 32.5% rate has been increased from $90,000 to $120,000.  (Please note, the below tables do not include the Medicare levy).

Table 1 – Taxation rate pre-budget

Taxable IncomeTaxation rate pre-budget
$0 – $18,200Nil
$18,201 – $37,00019c for each $1 over $18,200
$37,001 – $90,000$3,572 plus 32.5c for each $1 over $37,000
$90,001 – $180,000$20,797 plus 37c for each $1 over $90,000
$180,000 and above$54,097 plus 45c for each $1 over $180,000

Table 2 – Proposed taxation rate

Taxable incomeTax on this income
$0 – $18,200Nil
$18,201 – $45,00019c for each $1 over $18,200
$45,001 – $120,000$5,091 plus 32.5c for each $1 over $45,000
$120,001 – $180,000$29,466 plus 37c for each $1 over $120,000
$180,000 and above$51,666 plus 45c for each $1 over $180,000

LMITO

The low and middle income earner tax offset (LMITO) of up to $1080 has been retained for the 2020/2021 financial year. You can read more about this here.

Capital Gains Tax exemption

From July 2021 Granny Flats will no longer be applicable for Capital Gains Tax where there is a written arrangement that accommodates older Australians or people with disabilities. You can read more about this here.

Instant asset write-off

The treasurers second big-ticket item is in regards to immediate expensing, which allows businesses with aggregated turnover of $5 billion or less to deduct the full cost of eligible assets until 30 June 2022 to an uncapped amount (this applies to assets acquired from 7:30PM AEDT 6 October 2020).

Loss carry back

The loss carry-back scheme means businesses can offset losses against past profits, from as early as the 2018/2019 financial year. Normally, the business would need to return to profit before using losses.

This means that businesses that were profitable last year but are now running at a loss can reclaim some of the taxes paid the previous year.

This money will be received through tax refunds upon lodgment of tax returns.

Fringe Benefits Tax

While the Fringe Benefits Tax hasn’t been abolished, there are exemptions for small businesses, which, under the changes to the small business entity turnover threshold, now includes businesses with turnover of up to $50m.

Exemptions include:

From April 2021 these businesses will have access to the exemption for car parking, if it’s not provided in a commercial car park.

Currently, work-related items such as phones, laptops and tablets are exempt for both small and medium sized businesses. Duplicates or similar devices acquired in the same year for the same employee are exempt for small businesses only (unless in the case where the item was lost or broken). From 1 July 2021 these exemptions will be available to medium sized businesses (businesses with an aggregated turnover of $50m or less) also.

Additionally, eligible employer-provided retraining and reskilling of employees will also be exempt. This is to encourage employers to assist in transitioning their employees into new roles when necessary. This exemption comes into play from 2 October 2020.

Tax concessions extended to medium sized businesses

Medium sized businesses haven’t been forgotten; the Small Business Entity Turnover threshold will be increased from $10m to $50m. This means businesses with an aggregated turnover of $50m or less will be able to access further tax concessions (this comes into effect on 1 July 2021).

These include:

–                  Small business income tax offset

–                  PAYG instalment concession

–                  Two-year amendment period

–                  Simpler BAS

–                  Accounting for GST on a cash basis

–                  Excise concession

–                  FBT car parking exemption

–                  FBT work related devices exemption

–                  Superannuation clearing house tool

–                  Simplified trading stock rules (see here)

Manufacturing

$1.3 billion has been committed to creating manufacturing initiatives over the next four years. This will be focussed on six priority areas to address supply chain concerns raised by COVID-19.

These are:

–                  Food and beverages

–                  Minerals and resources tech

–                  Medical

–                  Recycling and clean energy

–                  Defence

–                  Space

You can read more about this here.

Research and Development

For companies with aggregated turnover of $20m or less, the offset percentage rate has been increased to 18.5% above the company tax rate.

The three tiers currently in place for companies with an aggregated turnover of greater than $20m have been reduced to two. Companies who spend up to 2% of total expenditure can claim 8.5 percentage points over the company tax rate while companies spending more than 2% can claim 16.5 percentage points over the company tax rate. 

The Morrison Government have committed $2 billion to the revised R&D scheme and scrapped the $4m refund cap for businesses spending less than 2% of total expenditure on research and development. This will come into play from July 2021.

JobMaker

Fresh incentives to hire more staff are also on offer. The JobMaker scheme will see employers given $200 per week for eligible employees aged between 16 and 29 years of age, and $100 per week for eligible employees aged between 30-35 years.

Eligible employees must have been on JobSeeker or Youth Allowance for at least one of the three prior months at the time of hire.

Building Better Regions

The Building Better Regions fund gained an extra $200m to support grants and create jobs in regional areas.

Farmers building dams or drilling bores will have access to a further $50m in rebates under the Emergency Water Infrastructure Rebate. You can read more about this here

Pensioner Payments

Pensioners will now be receiving two additional support payments, $250 in December and a further $250 in March totalling $500.

This applies to those receiving the age pension, disability support pension, carer payments, family tax benefit, Commonwealth Seniors Health Card holders, and some Veterans Affairs payment recipients.

These payments won’t be taxed and will not contribute towards income support.

Superannuation

The government is implementing “Your Super” – an online tool to assist in the comparison of Superannuation funds.

Super funds will now follow employees when they change jobs, meaning new super accounts will no longer be created when employees start a new job. This should eliminate the trap of an employee having 3-5 superannuation accounts with their funds being eaten away by multiples of fees and insurances.

Poor performing funds will now be required to notify members of their poor performance.

Apprenticeships

The Government will pay 50% of the wages for new apprentices and trainees for 12 months (to the value of $7,000 per quarter), regardless of their occupation, geographic location or size of the business. This scheme is capped at 100,000 places and will run until 30 September 2021.

You can read more about this here.

Insolvency changes

You can find a detailed explanation of the proposed changes to insolvency rules here.

First home-owners

The first home-owners grant has been extended with an extra 10,000 places being made available to prospective eligible buyers. In addition, the spending cap has been lifted from $750,000 to $950,000. 

If you have any questions about how these proposed changes might impact you and your business, give our team a call on 07 3205 8938 or complete our contact us form

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