The latest Federal Budget has introduced some key changes to Australian legislation that will affect small to medium sized businesses, NFPs and individuals. While government rulings are being implemented, use the time to review their implications and prepare for the future.
Following are some highlights of the new budget rulings handed down by the treasurer, with Hopscotch Accounting’s commentary on their ramifications for businesses, businesses and NFPs with employees, and for individuals. More details will be available during our upcoming webinar.
The Federal Budget is based on these assumptions:
- The government forecasts a record $213.7b deficit and net debt to peak at $966b, 44% of GDP by June 2024
- Unemployment is expected to peak at 8% in December 2020 and unemployment to fall to 6.5% by June 2022.
Loss carry-back for companies from FY20 to FY22
Tax losses can offset previous tax paid back to FY19 or later years, but only to the extent that you have franking credits.
The temporary return of these loss carry-back rules should be welcomed, but should they be permanent?
Instant asset write-off limits removed
Until 30 June 2022 eligible businesses will be able to deduct the full cost of eligible depreciable assets of any value in the year they are installed, as well as the balance of their simplified depreciation pool. Assets need to be acquired from 6 October 2020 and first used or installed ready for use by 30 June 2022.
This limit removal is another welcome measure and it may work well in conjunction with the loss carry-back provisions. However, the instant asset write-offs still need to be justified to make them work for your organisation. Always ensure first that your organisation can afford the purchase – whether dipping into business savings or the borrowing capacity. You can’t write off an expensive car since the motor vehicle limit, which is currently $59,136, remains unchanged.
R&D tax offset increased
From 1 July 2021 the refundable R&D tax offset will be set at 18.5% points above the claimant’s company tax rate; the current rate is 13.5%.
This tax offset should have particular benefits for start-up companies, providing them with potential to succeed. The government is backing innovation to create new employment opportunities to reduce the unemployment rate.
A new streamlined process will be introduced to enable eligible incorporated small businesses (broadly < $1m liabilities) in financial distress to restructure their debt from 1 January 2020.
Businesses and NFPs with employees
JobMaker Hiring Credit
From 7 October 2020, businesses and charities will receive the JobMaker hiring credit of $200 per week for every eligible worker aged up to 30 and $100 a week if they hire an eligible young person aged 30 to 35 years. Credits are payable for the next 12 months for new hires who work at least 20 hours per week.
The JobMaker Hiring Credit will be claimed quarterly in arrears by the employer from the ATO from 1 February 2021. The credit is capped at $10,400 for each additional new position created and in total cannot exceed the amount of the increase in payroll for the reporting period in question.
The credit will incentivise businesses to take on additional young job seekers. There are, however, some concerns about how this legislation will impact employment opportunities for older Australians, as they will now appear to be ‘more expensive’ to hire.
FBT exemption for work-related portable electronic devices
From 1 April 2021 multiple work-related portable electronic devices like laptops, mobile phones and tablets will be exempt from FBT.
Given how much we all rely on technology, this legislation seems to be overdue. The exemption will be especially useful to businesses and NFPs striving for a more flexible working environment by providing portable technology to support employees.
FBT exemption for retraining and reskilling employees
From 2 October 2020, the retraining and reskilling benefits provided by an employer to redundant, or soon to be redundant, employees, where the benefits may not be related to their current employment will be exempt from FBT.
This measure should help to encourage employers to assist redundant workers to transition to new employment opportunities, including retraining them for different roles in other areas of the business, or preparing them for their next career outside the business.
Apprentice and trainee subsidy
Employers will be eligible for a 50% contribution to the wages for a new or recommencing apprentice or trainee up to 30 September 2021, capped at $7 k per quarter.
This could help your business if you qualify for the apprentice or trainee subsidy – but don’t delay. The benefit is capped at 100,000 funded places.
Reduction in FBT record keeping compliance
Employers will be able to rely on existing corporate records, rather than employee declarations and other prescribed records, to finalise their FBT returns (provisionally starting from 1 April 2021). It will remove the need for employers and employees to complete certain additional records to comply with FBT obligations.
This measure will ultimately make compliance less costly for employers, by reducing the time cost of record keeping, while still preserving a robust FBT system.
Mental health support
Beyond Blue’s NewAccess program in partnership with the Australian Small Business and Family Enterprise Ombudsman has been expanded, providing free, accessible and tailored support for small business owners.
It has been one hell of a year, so please reach out to organisations such as Beyond Blue if you need some assistance.
Personal tax cuts brought forward to 1 July 2020
Low and middle income earners will receive tax relief of up to $2,745 for singles, and up to $5,490 for dual income families, compared with FY18.
These tax cuts have been brought forward two years earlier than originally planned and will benefit low income and middle income employees. The budget is assuming most of the tax savings will be spent by taxpayers to stimulate the economy.
$500 for income support recipients
Payments will be made in 2x $250 instalments in November 2020 and early 2021 for eligible income support recipients and concession card holders.
CGT exemption for ‘granny flats’
From 1 July 2021 a targeted CGT exemption will apply to granny flats. This exemption will only apply to agreements that are entered into because of “family relationships or other personal ties” and will not apply to commercial arrangements.
This legislation is designed to formalise arrangements with homeowners who build a granny flat and claim the CGT exemption. The exemption will benefit families by helping provide safe accommodation for elderly Australians and those with a disability. The emphasis on formal written measures will reduce the risk of vulnerable older homeowners being exploited by their children.
5% deposit for First Home Buyers
A further 10,000 places will be allocated to the 5% deposit for First Home Buyers scheme from 1 January 2020. The government guarantees the bank up to 20% of the purchase price so that Lender’s Mortgage Insurance is not required.
This is not a new scheme, but an increase of 10,000 more places for the First Home Loan Deposit Scheme where eligible first home buyers can obtain a loan to build a new home or purchase a newly built home with a deposit of as little as 5%. Increased accessibility may prompt more potential home buyers to consider if the timing is right to make their first foray into the property market.
Additional Home Care packages
An additional 23,000 Home Care packages are to be funded and will be rolled out from November 2020.
The only problem with the 23,000 Home Care packages is there is a waitlist of approximately 100,000, so while the funding is not enough it can be welcomed as a step in the right direction.
For further details and discussions, book into upcoming webinar on 11am Friday 30 October. Join Hopscotch Accounting Directors Brendan Lucas CA and Matthew Knight CA as they highlight key elements of the 2020 Budget and what it means for your business or NFP. Register for the webinar here.