On Tuesday, 6 October 2020, The Federal Treasurer Josh Frydenberg handed down the 2020-21 Federal Budget detailing steps to boost the economy suffering from the impact of the COVID-19 pandemic. Mr Frydenberg said, the Budget was “all about jobs”, creating new jobs and getting the unemployment back into work again and getting the economy moving.
The 2020/21 Federal Budget sees a record $213.7 billion deficit and the net debt predicted to peak at $966 billion (44% GDP) by June 2024. Unemployment is expected to peak at 8% in December 2020, keeping the Government focused on creating jobs. It expects unemployment to fall to 6.5% by June 2022.
The budget reflects the Government’s focus on driving Australia’s economic recovery and provides significant support measures for households and businesses.
The key tax measures can be summarised as follows:
Immediate tax relief:
From 1 July 2020, the top threshold of the 19 per cent tax bracket will increase from $37,000 to $45,000 and the top threshold of the 32.5 per cent tax bracket will increase from $90,000 to $120,000.
The low income tax offset will increase from $445 to $700 and the low and middle income tax offset (LMITO) due to be repealed, will be retained for one more year (2020-21).
Capital Gains Tax:
A targeted capital gains tax exemption will apply for granny flat arrangements providing accommodation for older Australians or people with disabilities from 1 July 2021.
Support for pensioners & welfare recipients:
Two separate $250 economic support payments will be provided to eligible income support recipients and concession card holders. The first payment will be made from November 2020 and the second from early 2021.
Immediate tax write-off:
Business with aggregated annual turnover of up to $5b will be able to deduct the full cost of eligible depreciable assets of any value in the year they are installed from 6 October 2020 to 30 June 2022.
Eligible companies with turnover up to $5b will be able to offset tax losses against prior year taxed profits to generate a refund from the 2019-20, 2020-21 or 2021-22 income years to offset previously taxed profits in 2018-19 or later income years.
Specific changes for small business:
Businesses with turnover between $10m and $50m will have access to some existing small business tax concessions (e.g. start-up expenses, FBT exemptions on car parking or simplified trading stock rules).
Research and Development:
Small Research & Development (R&D) entities from 1 July 2021 is to be entitled to an offset of 18.5% with no refundable limit ($4m refund cap has been abandoned).
Incentives for employers to hire:
Eligible employers can claim a JobMaker Hiring Credit of up to $200 per week for each additional new job they create for an eligible employees who are aged between 16 and 35 for a period of up to 12 months.
The apprenticeship wage subsidy will be further expanded by JobMaker for a subsidy of 50%, up to a maximum of $7,000 per quarter per eligible apprentice or trainee.