WOW this is the Budget we all knew would be big and broad and it has not disappointed.
Please be aware the JobKeeper extension is the only measure that has been legislated, all other measures are yet to be legislated.
We have summarised the parts of the budget we think will be the most important to you.
Instant Asset Write Off (IAWO)
The immediate write-off of new business investments without a spending limit until 30 June 2022, will provide a strong incentive for all but the very largest businesses (i.e. those with turnover in excess of $5 billion).
Businesses with an aggregated annual turnover of less than $50 million will also be allowed to write off second-hand assets.
The Government has announced a ‘loss carry-back’ mechanism which will allow Companies that have paid tax in the past but are now in a tax loss position, to carry their loss back to those past years to obtain a refund.
Under the measure, companies will be allowed to carry-back losses from the 2019–20, 2020–21, and 2021–22 income years against taxable incomes from the 2018–19, 2019–20, or 2020–21 income years.
Eligible Companies can elect to claim the tax refund when they lodge their 2020–21 and 2021–22 tax returns.
Under the new loss carry-back, the measure is capped in the following ways:
- the CTE must have an aggregated annual turnover of less than $5 billion;
- the amount carried back must not be more than the earlier taxed profits; and
- the carry-back must not generate a franking account deficit.
Personal Income Tax cuts
The stage 2 tax cuts are being advanced with the start date moving from 1 July 2022 to 1 July 2020.
Under the revised plan:
- the upper income threshold of the 19% personal income tax bracket will increase to $45,000; and
- the upper income threshold of the 32.5% personal income tax bracket will increase from $90,000 to $120,000.
- The low and middle income tax offset (LMITO) which is worth up to $1,080, will be retained until 1 July 2021, an extra year than previously planned.
What does this mean for me?
The Stage 2 personal tax cuts means people who earn:
- between $45,000 and $90,000 will have an additional $1,080 of after-tax income in 2020–21;
- people on more than $120,000 will have an additional $2,430 of after-tax income in 2020–21 compared to 2019-2020 rates or $2,565 compared to 2018 rates.
Capital Gains Tax
CGT exemption for granny flat arrangements
The Government has announced that it will provide a targeted capital gains tax (CGT) exemption for granny flats where there is a formal agreement in place for a family member to reside on the relevant property (either in the same home or a separate building). The exemption will only apply to older Australians OR those with a disability needing care.
If this measure is legislated before 30 June 2021, it should commence as early as 1 July 2021.
The exemption will not be available for a property that is not the principal home of the taxpayer (for example, a rental property that happens to contain a granny flat).
Jobs – New JobMaker Hiring Credit
The JobMaker Hiring Credit will encourage businesses to take on young workers under 35. Employers will receive $200 p/week for hiring eligible employees aged 16-29 years OR $100 p/week for the hire of eligible employees aged between 30 to 35 years.
Only young employees who have received JobSeeker, Youth Allowance, or Parenting Payment for one of the three months before getting hired will be subsidised under the scheme.
New hires must work at least 20 hours a week to be eligible.
The new JobMaker credit will be available for new jobs created between the 7th October 2020 to 6th October 2021, and up to a maximum amount of $10,400 per additional new position created.
Apprentices and Trainees
Under a new $1.2 billion wage subsidy program, businesses that hire a new Australian apprentice or trainee will qualify for a 50% wage subsidy.
The ‘Boosting Apprenticeship Commencements’ subsidies are effective from October 5 and will be available to businesses of all sizes, in all industries and locations, until a cap of 100,000 apprentices is reached.
Employers will be able to receive subsidies for 50% of the wages of a new or recommencing apprentice or trainee to the value of $7,000 a quarter, until September 30, 2021.
This subsidy is in addition to the Supporting Apprentices and Trainees subsidy that was introduced as part of the COVID-19 stimulus package.
Supporting housing construction
An additional 10,000 first home buyers will be able to purchase a new home sooner under the extension to the First Home Loan Deposit Scheme. This will allow first home buyers to secure a loan to build a new home or purchase a newly built dwelling with a deposit of as little as 5 percent, with the Government guaranteeing up to 15 percent of a loan.
The Government has committed $1.3 billion in co-funding to manufacturing initiatives.
Organised into three streams of funding support, the Government will co-invest to provide funding:
- for very large projects that support business-to-business or business-to-research collaboration that will build economies of scale, with grants up to 1/3rd of the eligible costs;
- for manufacturers to commercialise ideas, with grants of up to 50% of the eligible costs and
- for manufacturers to integrate into local and international supply chains and markets, with grants of up to 50% of the eligible costs.
Research and Development
The Government is investing an additional $2 billion through the Research and Development Tax Incentive RDTI.
For small companies, with an aggregated annual turnover of less than $20 million, there will be no tiered approach to the RDTI.
Instead, the refundable tax offset has been set at 18.5 percentage points above a company’s tax rate.
The controversial $4 million cap on annual refunds has also been scrapped.
Aged, Family & Disability Support
Cash payments totaling $500 will be paid to around 5.1 million pensioners and other eligible recipients.
The first payment of the two will start being paid out from November. And the second in March 2021.
The payments won’t be taxed or count as income support for the purposes of income support payments.