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2020 Federal Budget – How Your Business Can Benefit

The 2020 Federal Budget bill containing a number of the tax measures has been passed by both houses of Parliament without amendments.

As well as disclosing income tax cuts for workers and changes to superannuation, the government also announced a range of schemes and incentives for Australian businesses. The Budget includes a range of new schemes that could help your business including: loss offsets, asset write-offs, wage subsidies for new hires and expanded tax concessions.

These schemes have been designed to boost cash flow, and motivate investment in assets and new employees. The key tax incentives that can benefit businesses are as follows.

Instant Asset Write-off: Claim Full Tax Deductions on Eligible Assets

Businesses with an annual turnover of less than $5 billion will be able to fully write-off the value of eligible assets.

The write-off will apply to assets purchased after the night of the Budget and first used or installed before 30 June 2022. In addition, businesses with an annual turnover of $50 million or less will be able to write off second-hand assets.

Briefly, businesses can now immediately deduct the full cost of all items such as: plant and machinery, fixtures and fittings, technology, and motor vehicles (i.e utes, vans and most cars).

Loss Carry-back Scheme: Generate a Tax Refund on Losses

It was also announced that businesses will be able to carry-back their losses to offset tax paid on profits in previous financial years. This means businesses that were previously profitable but are now making a loss can offset this loss and receive a tax refund.

Again, this scheme is available to businesses with annual turnover of less than $5 billion. Businesses can carry back any losses made in the 2019-20, 2020-21 or 2021-22 financial year to offset the tax paid on profits made in or after the 2018-19 financial year.

The tax refund will be available on an election basis by eligible businesses when lodging their 2020-21 and 2021-22 tax returns.

JobMaker: Wage Subsidies for New Hires

The JobMaker hiring credit will help subsidise the wages of young employees hired by businesses. Any business with a turnover of less than $5 billion is eligible to apply for this wage subsidy.

The Government has announced a credit available to businesses who increase their overall headcount by hiring employees aged 16-35 who are currently receiving welfare payments such as JobSeeker. The wage subsidy will be as follows: $200 per week for hiring a worker aged 16 to 29, and $100 per week for workers aged 30 to 35.

Small Business Concessions Expanded

The Government will expand access to a range of small business tax concessions by increasing the small business entity turnover threshold for these concessions from $10 million to $50 million. The concessions will be available to eligible businesses as follows:

  • From 1 July 2020 – businesses will be able to immediately deduct certain start-up expenses and certain prepaid expenditure.
  • From 1 April 2021 – businesses will be exempt from the 47% fringe benefits tax on car parking and multiple work-related portable electronic devices provided to employees.
  • From 1 July 2021 – 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.

If you would like to discuss this please contact our office.

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