Budget tax and business highlights

Drowning as many of you will be with Budget insights and summaries, here is our take on the key things we identified from last night’s Budget Papers and we are ready, willing and able to talk to you about what it all means…..

For Business

  • Instant asset write-offs – forget your $20,000 limit; politely wave away your $25,000 limit; disregard (rudely if you like) your $30,000 limit; trash (perhaps with a fond farewell) your $150,000 limit – there is no limit for business assets purchased after 7:30pm last night and installed ready for use (or in use) on or before 30 June 2022. But hold off on phoning your favourite Lamborghini dealers – there is no deal on luxury cars. But, for just about everything else – it’s game on! Remember also that it’s a tax deduction at your relevant tax rate – so, a company paying 26% is still 74% out of pocket, after-tax.
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  • Write-off pooled assets – consistent with the uncapped instant asset write offs, small businesses (with aggregated turnover of <$10 Million) can claim a deduction for the entire remaining balance of their simplified depreciation pool in the 2021 and/or 2022 financial year.
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  • Extension of existing 50% upfront deduction for assets >$150,000 purchased after 2 April 2019 and installed ready for use or first used from 12 March 2020 – the deadline by which the assets need to be installed ready for use or in use has been extended to 30 June 2021.
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  • Loss carry backs – if a business makes (or has made) a tax loss in the 2020, 2021 or 2022 financial years, this loss can be offset against profits (and therefore tax paid) in any of the 2019, 2020 and 2021 financial years. This may provide an immediate benefit for a business which suffered a loss in the 2020 year directly or indirectly due to COVID, such that it can offset this loss against any taxable profit the business made in the 2019 financial year and effectively claw back some or all of the taxes paid.
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  • The combo (Part 1) Instant asset write offs and ‘draining the asset pool’ in the current and next financial year may, themselves, generate significant tax losses that would otherwise be quarantined until a business subsequently generated a taxable income. Under the Budget measures noted above, a business can offset the loss created by the instant asset write-off to claw back taxes paid in prior years…… as Pete Smith would say, “step into the gift shop with Victoria Nicholls”. We will have some fun with you in maximising the opportunities.
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  • Apprentice subsidies – businesses will receive a 50% wage subsidy, up to a cap of $7,000 per quarter, for apprentices and trainees (including those employed by Group Training Organisations) commencing between 1 October 2020 and 30 September 2021. Existing workers embarking on a new apprenticeship will also be eligible.
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  • JobMaker hirer credits – cash subsidies of up to $200 per week for 12 months per new employee taken on from today and to be claimed quarterly in arrears from February 2021 – sounds great until you read the fine print, which is damn fine work that severely (but not fatally) restricts which businesses can receive it. So, still a very useful incentive to inspire employers to take on more staff, particularly employees aged between 16 and 29 (qualifying employees aged 30 -35 will generate $100 per week credit). In short, employers need to show an increase in both headcount AND total payroll AND be using Single Touch Payroll AND be up to date with all their tax lodgements AND not be receiving JobKeeper AND can’t be government agencies or wholly owned by government agencies AND employees must work an average of at least 20 hours per week; must have been on JobSeeker, Youth Allowance or Parenting Payment for at least one of the three months prior to being employed; AND blah blah blah (please call us!)
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  • Increasing the small business threshold from $10 Million to $50 Million for eligibility for various concessions covering such things as immediate deductions for start-up expenses and prepayments, FBT exemption on car parking provided to employees, simplified trading stock rules and reducing the period for amendment of assessments from 4 years to 2 years.
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  • Increase in R&D tax offsets (from 1 July 2021) for eligible businesses turning over <$20M - increased to 18.5 percentage points above the relevant company tax rate.
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  • Changes to insolvency laws to assist businesses to rebuild, refinance, extend, etc.
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For Individuals

  • Bring forward of personal tax cuts backdated to 1 July 2020, see below for changes to the 19% and 32.5% tax thresholds.

  • Rate
    Current (2019 to 2022)
    Proposed (2021 – 2024)
    0%0 – $18,2000 – $18,200
    19%$18,201 – $37,000$18,201 – $45,000
    32.5%$37,001 – $90,000$45,001 – $120,000
    37%$90,001 – $180,000$120,001 – $180,000
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  • The combo (Part 2) Businesses with instant asset write-offs and loss carry backs, owned and operated by individuals now on lower tax-rates with higher thresholds – ooh, let me count the ways….
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  • Scomo’s election-winning LMITO (Low and Middle Income Earners Tax Offset) of up to $1,080 to be retained for the 2021 financial year.

  • LITO (Low Income Tax Offset) increasing from $445 to $700 brought forward from 1 July 2022 to 1 July 2020.

  • Pensioner top-ups 2 x $250 tax-free payments for eligible pensioners to be paid in November 2020 (in time for Christmas) and in early 2021 (in time for Easter?!)
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  • Funding for Cadetships and Apprenticeships for women in science, technology, engineering and mathematics (STEM).

  • There will be more details to come and, in the meantime we love to talk about this stuff (it’s what we do) so feel free to contact us with any queries or insights as we move into Budget 2021 and beyond.

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