On 6th October 2020 the federal government handed down a Federal Budget that has been touted as one of the most important Budget for Australia in history.  The following are some of the items announced that are most likely to be related to businesses.  Please note these are only announcements and they will only become law once the relevant legislation's are passed by the parliament and the senate.
 

Individuals 
 

The Government will bring forward the second stage of its Personal Income Tax Plan by two years to 1 July 2020 while retaining the low and middle income tax offset (LMITO) for 2020-21.


INCOME TAX CUTS

The Government has announced that it will bring forward changes to the personal income tax rates that were due to apply from 1 July 2022, so that these changes now apply from 1 July 2020 (i.e., from the 2021 income year).
 
These changes include:

 
  • raising the 19% bracket from $37,000 to $45,000; and
  • raising the 32.5% bracket from $90,000 to $120,000.
 
The proposed income tax brackets from 1 July 2020 are as follows and will apply until 30 June 2024.
 
These changes are illustrated in the following table (which excludes the Medicare Levy)
 
Income Tax Rate Current Threshold
(2019 to 2022)
New Threshold
(2021 – 2024)
0.0% Up to 18,200 Up to 18,200
19.0% Up to 37,000 Up to 45,000
32.5% Up to 90,000 Up to 120,000
37.0% Up to 180,000 Up to 180,000
45.0% 180,000+ 180,000+

 
 
 
 
 
 
 
 


PERSONAL TAX OFFSETS  
  • Low Income Tax Offset (LITO)
In addition, the Government will bring forward the proposed increase to the Low Income Tax Offset (LITO) from $445 to $700.
 
Individuals who have a taxable income below $37,500 will be entitled to the full non-refundable tax offset. Above this amount, LITO is tapered off at two different levels:

 
  • $37,500 and $45,000 will be tapered off at 5 cents per dollar, and
  • $45,000 and $66,667 will be tapered off at 1.5 cents per dollar.
  • Low and Middle Income Tax Offset (LITO)  
The previously announced removal of LMITO, when stage two of the plan is implemented, has now been removed. As a one-off benefit in the 2021 year you will receive the LMITO as well as the stage two tax cuts.

EXAMPLES OF TAX CUTS AT DIFFERENT INCOME LEVEL

 
Taxable Income 2020/2021 Tax reduced by: 2021/2021 Tax reduced by:
$50,000 $1,080 $0
$80,000 $1,080 $0
$100,000 $1,530 $750
$120,000 $2,430 $2,250
$180,000 $2,430 $2,430
 


CAPITAL GAINS TAX REMOVED FOR GRANNY FLATS

The Government also announced that it will provide Capital Gains Tax (CGT) exemption for granny flat arrangements where there is a formal written agreement for a family member to reside on the relevant property.  
The exemption will apply to arrangements with older Australians or those with a disability.



SOCIAL SECURITY RECIPIENTS

Two $250 payments for each eligible recipient will be rolled out in two separate waves.

The first of these payments will be made from November 2020, providing a much-needed boost in income during the pre-Christmas period.

The second payment will be actioned in early 2021, with the Government yet to provide an exact timeline for the relief.
 
The eligible recipients include those who already receive the following payments:
  • Age Pension’
  • Disability Support Pension;
  • Carer Payments;
  • Family Tax Benefits;
  • Double Orphan Pension;
  • Carer Allowance.

 
Additionally, these payments will also be available to Pensioner Concession Cardholders, Commonwealth Senior Cardholders, and Veteran Affairs Concession Cardholders.
 
The payments will be exempt from tax and will not count as income support for the purpose of any income support payment.

Business Incentives & Companies 
 
Instant Asset Write-Off

The Government has announced a temporary measure to allow businesses to claim an immediate deduction for the full costs of eligible capital assets.
               
  • Businesses with annual aggregated turnover of less than $5 billion will be entitled to an immediate tax deduction for the full cost of new eligible capital  assets and improvements to existing eligible assets acquired from 7.30pm AEDT on 6 October 2020 and first used or installed by 30 June 2022;
 
  • Businesses with aggregated turnover of less than $50 million will also be entitled to an immediate tax deduction for the full cost of second-hand assets acquired from 7:30pm AEDT on 6 October 2020 and first used or installed by 30 June 2022;
 
  • Businesses with aggregated annual turnover between $50 million and $500 million can claim an immediate deduction for the full cost of eligible second-hand assets costing less than $150,000 if they are purchased by 31 December 2020 and installed ready for use by 30 June 2021; and
 
  • Small businesses with aggregated turnover of less than $10 million can deduct the balance of their simplified depreciation pool at the end of the income year under the new measure. The provisions which prevent small businesses from re-entering the simplified depreciation regime for five years if they opt-out will continue to be suspended. 

Temporary Losses-Carry Back for Companies  

Eligible companies with turnover up to $5 billion will be able to offset tax losses against prior year taxed profits to generate a refund.
 
Under the measure, losses incurred in the 2019/20, 2020/21 or 2021/22 income years may be carried back against profits made in or after the 2018/19 income year.
 
The will allow such companies to generate a refundable tax offset in the year in which the losses is made. The tax refund is limited by requiring that the amount carried back is not more than the earlier taxed profits or generate a franking account deficit.
 
Currently, companies are required to carry losses forward to offset taxable profits in future years. Companies that do not elect to carry back losses will continue to carry losses forward as normal.
 

JobMaker Hiring Credit
(For Employers creating new jobs)
 
The Government will introduce JobMaker Hiring Credit to incentive's businesses to take on additional young job seekers.
 
From 7 October 2020, eligible employers  will be able to claim:
 
  • $200 weekly payment for businesses who employs people between 16-30 who are on JobSeeker for 12 months;
  • $100 weekly payment for businesses who employs people between 30-35 who are on JobSeeker for 12 months;
 
New jobs created by an eigible employer until 6 October 2021 will attract the credit for up to 12 months from the date the new position is created and capped at $10,4000 for each additional new position created. Note eligible employer must show that there is an increase in overall total headcount and payroll for the reporting period to claim the credit.
               
In order for an employee to be eligible for either of the tiers of payment, they will be required to have worked, on average, at least 20 hours per week each quarter. Further to this, they must also have received the JobSeeker Payment, Youth Allowance or Parenting Payment in at least one of the three months prior to their new employment.
 
It should be noted, the JobMaker Hiring Credit will also not  be available to employers who are claiming the JobKeeper payment.
 

50% Wage Subsidy for Apprentice

Apprenticeship wage subsidy expanded The apprenticeship wage subsidy program announced in the July 2020 Economic and Fiscal Update, will be expanded to allow businesses of any size to claim the subsidy.
 
Eligible businesses that employ apprentices or trainees will be eligible to receive up to a 50% wage subsidy, up to $7,000 per quarter, capped at 100,000 places.
 
This new measure will run from 5 October 2020 to 30 September 2021.