Federal Budget 2020

Talking Points Fed Budget doubles down on assistance for businesses, as net debt blows out to $905 billion. Introduction of an Uncapped Immediate Write-Off for depreciable assets acquired from 6 October 2020. Medium-sized entities (between $10-$50 million turnover) can now access up to 10 small business concessions.  Carry back losses available to eligible companies to offset 2020 losses against 2019 profits in order to receive a refundable tax offset.  Generous increases to the Research & Development Tax Incentive applicable from 1 July 2021. The JobMaker Hiring Credit gives eligible employers $200/week for new hires aged between 16 and 29, or $100/week for 30 – 35 year olds. Support for small business mental health and financial wellbeing. New incentives for employers to help retrain and reskill redundant workers via FBT exemptions.

The Federal Budget 2020

Has there ever been a more eagerly anticipated Federal Budget? Not in recent times that’s for sure.

The Treasurer has announced a range of spending, tax cuts and employment boosting measures to steer the Australian economy out of recession.

Outside of bringing forward planned tax cuts for individuals, the Budget overwhelmingly focuses on aiding businesses in their recovery and growth as the Government begins its transition off stimulus support.

What does the Budget mean for your business?

Uncapped Write-Off for Depreciable Assets

• Eligible businesses with a turnover less than $5 billion will be able to fully write-off the entire cost (uncapped) of a depreciable asset in the year it is installed ready for use (or first used).
• The asset must be acquired from 6 October 2020 and be ready for use by 30 June 2022.
• The Instant Asset Write-Off the Government introduced during the pandemic still applies for businesses < $500m turnover, with a 6 month extension of Ready for Use date to 30 June 2021.

Increased Tax Concessions

• Eligible businesses with turnover of $10 – $50 million will now be able to access tax concessions previously only available to small businesses.
• Examples of concessions include the immediate deductibility of start-up expenses or prepayments.
• The introduction of these concessions is being phased across 3 stages:
  • Retrospective deductibility of start-up & pre-paid expenses for eligible businesses from 1 July 2020
  • Eligible businesses will be exempt from the 47% FBT on car parking and multiple work-related portable electronic devices for employees from 1 April 2021
  • From 1 July 2021 eligible businesses will be able to access the simplified trading stock rules, remit pay as you go (PAYG) instalments based on GDP adjusted notional tax, and settle excise duty and excise-equivalent customs duty monthly on eligible goods under the small business entity concession. Eligible businesses will also have a two-year amendment period apply to income tax assessments for income years starting from 1 July 2021, excluding entities that have significant international tax dealings or particularly complex affairs.

Ability to Claim Tax Refunds through Carryback Losses

• Eligible to businesses with turnover < $5b.
• Tax refunds available in FY21 and FY22 returns.

Research and Development

• Eligible SMEs with turnover up to $20 million will benefit from a refundable R&D tax offset of 18.5% above their usual tax rate on eligible activities.
• Eligible large companies with turnover over $20 million can access a non-refundable R&D tax offset depending on R&D intensity:
  • If R&D Intensity is under 2%, rate is 8.5% above usual tax rate
  • If R&D intensity is over 2%, rate is 16.5% above usual tax rate
• The proposed $4 million cap on SME refunds will no longer be implemented.

*We will be communicating these developments in more detail shortly.

The Introduction of JobMaker & Incentives to Hire

• JobMaker has been introduced to increase the employment of people under the age of 35 as well as trainees & apprentices.
• Eligible employers will receive:
  • $200/week for each new hire aged between 16 – 29 years of age.
  • $100/week for each new hire aged between 30 – 35 years of age
  • 12 months of credit is available for the above hires and will expire on 6 October 2021 and is capped at $10,400 per new hire.
  • Credit is claimable from ATO from February 2021 onwards.
• Eligible employees are those that:
  • have been employed for at least 20 hours of paid work per week on average
  • received either the JobSeeker payment, Parenting Payment or the Youth Allowance payment prior to being hired
  • began employment between 7 October 2020 and 6 October 2021.

FBT & incentives to re-train & re-skill employees

• With so many workers at risk of redundancy or having already been made redundant, new FBT exemptions have been introduced to encourage employers to invest in retraining their employees rather than let them go.
• Currently, reskilling training provided to redundant employees attracts an FBT liability. This liability is being removed, so long as the training is not provided by way of salary packaging.
• Other FBT changes include:
  • Car parking exemption has been extended to businesses with turnover less than $50 million 
  • The requirement for employee declarations has been removed for small businesses to reduce the compliance burden.

At CharterNet, we will continue to keep you updated as things develop. Always feel free to get in touch if we can help clarify anything.