The Federal Budget for the 2020/2021 financial year has been released with a number of measures included to continue the economic support for Australian’s impacted by the COVID-19 pandemic.
Key measures included in the Budget are:
- Changes to individual tax rates and tax offsets
- Threshold removed for small business asset write-offs
- JobMaker Hiring Credit of up to $200 for eligible new employees
- Expanded wage subsidy for apprentices and trainees
- Temporary tax loss carry back for eligible companies
- Further economic support payments for eligible welfare recipients
Please note that these measures still need to pass legislation.
Individual Tax Cuts
Changes to individual income tax rates and tax offsets have been brought forward from 1 July 2022 to 1 July 2020.
From 1 July 2020:
- The 19% tax bracket will increase from $37,000 to $45,000
- The 32.5% tax bracket will increase from $90,000 to $120,000
Personal Tax Offsets
The Low Income Tax Offset (LITO) will increase from $445 to $700. Individuals with a taxable income of less than $37,000 will have access to the full non-refundable tax offset, with it tapering off as follows:
- $37,500 and $45,000 will be tapered off at 5 cents per dollar
- $45,000 and $66,667 will be tapered off at 1.5 cents per dollar
Threshold Removed for Immediate Asset Write-Offs
Small businesses with a turnover of less than $5 billion will be able to claim an immediate deduction for all new or second-hand assets purchased from 6 October 2020 and installed and ready for use by 30 June 2022. The immediate asset write-off was previously capped at $150,000.
Small businesses will also be able to deduct the full balance of their simplified depreciation pools while this uncapped write-off applies.
JobMaker Hiring Credit
Eligible employers can claim a JobMaker Hiring Credit for each additional new job they create for an eligible employee from 7 October 2020 to 6 October 2021. The Credit will be available from the date of employment for up to 12 months and capped at $10,400 for each additional new position created.
Eligible employers will receive:
- $200 per week if they hire an eligible employee aged 16 to 29 years
- $100 per week if they hire an eligible employee aged 30 to 35 years
- Permanent, casual or fixed term employees
- Aged either 16 to 29 years old for the $200 per week payment or 30 to 35 years for the $100 per week payment
- Worked at least 20 hours per week on average for the full weeks they were employed in the reporting period
- Commenced employment between 7 October 2020 – 6 October 2021
- Were receiving JobSeeker, Youth Allowance or Parenting Payment for at least one month within the past three months before they were hired
- Are in their first year of employment with this employer and employed in the period the employer is claiming for them
- Have an ABN
- Are up-to-date with tax lodgements
- Registered for Pay As You Go Withholding (PAYGW)
- Reporting through Single Touch Payroll (STP)
- Have kept adequate records of hours worked by eligible employees
- Are not claiming JobKeeper payments
- Are able to demonstrate that each credit is claimed for an additional job that has been created. Please note there must be an increase in the business’s total employee headcount and payroll for the reporting period (based on a comparison over a specified reference period)
Expansion of Apprenticeship & Trainee Wage Subsidy
The apprenticeship wage subsidy program announced in the July 2020 Economic and Fiscal Update, will be expanded to allow businesses of any size to claim the subsidy.
Eligible businesses that employ apprentices or trainees will be eligible 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.
Temporary Loss Carry Back for Companies
Eligible companies with turnover up to $5 billion will be able to offset tax losses from the 2020, 2021 or 2022 financial years against previously taxed profits made in or after the 2019 income year to generate a refund.
The tax loss carried back cannot exceed the prior year taxed profits or generate a franking account deficit. The tax refund will be available on election by eligible companies when they lodger their tax returns for the 2021 and 2022 financial years.
Currently, companies are required to carry losses forward to offset taxable profits in future years. Companies that do not elect to carry back losses will continue to carry losses forward as normal.
Further Economic Support Payments
Two separate economic support payments of $250 will be provided to eligible recipients. The first payment will be made from November 2020 and the second from early 2021.
Payments will be made to eligible recipients of the following benefits and health care card holders:
- Age Pension
- Disability Support Pension
- Carer Payment
- Family Tax Benefit
- Carer Allowance
- Pensioner Concession Card holders
- Commonwealth Seniors Health Card holders
- Eligible Veterans’ Affairs payment recipients and concession card holders
These payments will be tax exempt and will not count as income support for the purposes of any income support payment.