The Federal Budget has been delivered and has focused on stimulating the economy out of the Covid-19 induced recession we are currently facing.
As with all Budgets, these are announcements only and have not been legislated. The details are still to be worked through, and both Houses of Parliament need to pass legislation before the announcements take effect.
The key personal and business related tax highlights of last night’s Budget are summarised below:-
1. Personal income tax measures
The Government announced that it will bring forward stage two of its legislated tax cuts so that those cuts commence now rather than in the 2022-2023 financial year.
These changes to the personal income tax brackets are set out below:
Tax rates and thresholds
|
Rate |
2019-2020 |
2021-2023 |
2024-25 onwards |
|---|---|---|---|
|
0% |
$0-$18,200 |
$0-$18,200 |
$0-$18,200 |
|
19% |
$18,201-$37,000 |
$18,201-$45,000 |
$18,201-$45,000 |
|
30% |
- |
- |
$45,001-$200,000 |
|
32.5% |
$37,001-$90,000 |
$45,001-$120,000 |
- |
|
37% |
$90,001-$180,000 |
$120,001-$180,000 |
- |
|
45% |
$180,001+ |
$180,001+ |
$200,001+ |
In addition, the Low and Middle Income Tax Offset ("LMITO") originally planned to finish in 2022 has been extended out for a further 12 months up to 30 June 2023.
2. Business related tax measures
- Temporary full expensing of Capital Assets An extension of the Instant Asset Write off ("IAWO") rules will see all businesses with aggregated annual turnover of less than $5 billion entitled to deduct the full cost of eligible capital assets purchased from 7:30pm AEDT on 6 October 2020 (budget night) and first used and installed by 30 June 2022. In addition, businesses with aggregated annual turnover of less than $50 million will also be entitled to an immediate tax deduction for the full cost of second hand assets acquired after 7:30pm last night. There are several other measures dealing with new IAWO rules further explained in the accompanying commentary.
- Loss Carry Back for companies Companies with turnovers of up to $5 billion per annum that have suffered losses or will continue to be in a loss-making position will now be able to access refunds of taxes previously paid. The measures apply to losses made in the 2020 to 2022 financial years. Taxes paid in respect of the 2019 financial year onwards are potentially eligible as a tax refund.
- R&D tax incentives There are several changes and reversals of previously announced changes to the R&D tax incentive and for a more detailed discussion we refer you to the attached commentary. In summary, from 1 July 2021, companies with aggregated annual turnovers of less than $20 million will receive a 18.5% tax incentive (refundable) above the prevailing company tax rate in respect of expenditure on eligible R&D activities. Companies with turnovers above $20 million will continue to be entitled to the 8.5% above the company tax rate incentive.
- Small business tax concessions Businesses with aggregated annual turnovers between $10 million and $50 million will now have access to 10 small business tax concessions previously only available to small entities with turnovers below $10 million.
3. Other measures
- JobMaker hiring credit. Up to $200 per week will be available (as a credit) to those eligible employers that take on new staff aged between 16 and 29 and $100 for those aged 30-35.
- Apprenticeship wage subsidy. From 5 October 2020 until 30 September 2021 businesses (of any size) will be eligible for reimbursement of up to 50% of an apprentice or trainees wages worth up to $7,000 per quarter.
- Capital Gains Tax exemption will be extended to granny flats from 1 July 2021 for personal/family relationships.
- FBT changes and simplification to things such as car parking benefits, multiple work related electronic devices and some compliance requirements.
Full Budget Report
For further details in respect of the content of the Federal Budget we refer you to the attached paper issued by Thomson Reuters.