Deloitte's Federal Budget 2020-21
Federal Budget Overview
This edition of the Signum Business Advisers newsletter is a commentary on the Australian Government's 2020/21 Budget which was delivered by the Federal Treasurer.
Please note that the Government's Budget will now be debated in the House of Representatives and the Senate must approve the Budget items before any of these items become law.
If you would like to discuss with us any of the matters that were included in the Government's Budget, please do not hesitate to contact us.
The major announcements affecting small businesses and medium-sized enterprises were:
JobMaker Hiring Credit
The JobMaker Hiring Credit will be $200 a week for workers aged 16 to 29 and $100 a week for workers aged 30 to 35.
For employers to claim the subsidy, new hires must work for, at least, 20 hours a week and the business must show an increase in overall headcount.
The employee must also have been receiving JobSeeker, Youth Allowance or a Parenting Payment for, at least, one of the previous three months at the time of hiring
Businesses already claiming JobKeeper will be ineligible for the JobMaker Hiring Credit subsidy.
Whilst jobs created from 7th October 2020 will be eligible, employers will have to make claims in arrears, on a quarterly basis, from 1st February 2021.
The government strategy is that the JobMaker Hiring Credit Scheme will be closed to new entrants from 7th October 2021.
Apprentices/Trainees – the government has committed $1.2 billion to create 100,000 new apprenticeships and traineeships with a 50% wage subsidy for businesses who employs these apprentices and trainees.
Taxation Rates Reduced
Taxation Rates Reduced – more than 11 million taxpayers will get a tax cut backdated to 1st July 2020.
Lower and middle income earners will, this year, receive tax relief of up to $2,745 for singles and up to $5,490 for dual income families as compared with 2017/18. This will be achieved by bringing forward stage two of the government's legislated tax cuts by 2 years, lifting the 19% threshold from $37,000 to $45,000 and lifting the 32.5% threshold from $90,000 to $120,000.
The government has also indicated that it will retain the low and middle income tax offset of $1,080 for the current financial year.
Instant Asset Write Off
The temporary supercharged Instant Asset Write Off will be available to businesses with turnovers up to $5 billion. Businesses will be able to deduct the full cost of eligible depreciable assets of any value.
Qualifying assets need to be acquired after 7:30pm on 6th of October 2020 and must be first used or installed by 30th June 2022.
Small and medium-sized businesses, with annual turnover of less than $50 million, will be able to fully expense the acquisition of second-hand assets.
Eligible businesses that acquire eligible new or second-hand assets, under the enhanced $150,000 Instant Asset Write Off by 31st December 2020, will also have an extra 6 months, until 30th June 2021, to first use or install those assets.
Rules which prevent small businesses from re-entering the Simplified Depreciation Regime for 5 years, if they opt out, will continue to be suspended.
Affordable Housing Developers
An extra $1 billion in low-cost financing to help build more affordable housing.
First Home Buyers Scheme
Up to 10,000 more first home buyers will be able to get a loan to build a new home or buy a newly built home with a deposit of, at least, 5%.
Loss Carry Back
Unfortunately, the Loss Carry Back initiative does not apply to sole traders, partnerships or trusts. The Loss Carry Back allows businesses to access their losses earlier through a cash refund for losses accrued in 2019 – 20, 2020 – 21 and 2021 – 22 when businesses lodge their 2020/21 and 2021/22 tax returns.
Manufacturing Incentive – the government has settled on 6 priority areas it believes represents the future of Australian manufacturing and will spend an initial $1.5 billion encouraging their development as part of its post-recession plans.
Australian Economy – the government is forecasting that the Australian economy will fall by 3.75% this calendar year and unemployment will peak at 8% in the December quarter. In 2020- 21 calendar year the government is forecasting the economy to grow by 4.25%.
The government is forecasting unemployment to fall to 6.5% by the June quarter 2022.
Deloitte's Federal Budget 2020-21
Fringe Benefits Tax Changes
The government is proposing a number of changes relative to Fringe Benefits Tax applicable from 1st April 2021 including:
- Employers would be exempt from FBT for retraining employees who face redundancy largely to be redeployed elsewhere in the business to take up a new role.
- FBT will be scrapped for benefits such as car parking or items provided to employees, including phones and laptop computers.
- The government is expanding the number of small businesses eligible for tax concessions by expanding the turnover threshold from $10 million to $50 million.