We have summarised the key points from the 2020-2021 budget, that we believe will have the most impact on our clients.

Please keep in mind that all budget measures are proposals and will require the passage of legislation to become effective.

2020 Federal Budget - Business Summary

The business measures announced in last night's Federal Budget will help promote the investment in Small-Medium Enterprises (SMEs).

Here at the key summaries of the announcements:

Instant asset write-off

For those businesses with an aggregated annual turnover of less than $50 million will be allowed an immediate write-off on any eligible asset (new and second hand) purchases after 7.30pm on 6 October 2020 and before 01 July 2022. Any business that exceeds the $50million turnover will only receive the immediate write-off on eligible new business assets.

Loss carry-back

The measure will provide significant help for struggling businesses making current year losses. Any tax paid in respect of a previous year will be refunded to the taxpayer. The constraints on this announcement are;

The loss carry-back can only go back as far as the 2019 Financial year
The carry-back must not generate a franking account deficit
The carry-back will cease at the end of the 30 June 2022 financial year

JobMaker - Creating jobs for the economic recovery

The JobMaker Plan is designed to boost economic growth, create jobs, invest in future industries and skills, remove red tape, guarantee essential services and restore confidence in a stronger recovery. One of the measures of JobMaker is 'Supporting Australian's back into jobs', by incentivising businesses to take on additional employees aged between 16 and 35 years old. Around 450,000 positions for young Australians will be supported through JobMaker Hiring Credits.

R&D incentives

The Government is investing an additional $2 billion through the Research and Development Tax Incentive to help innovative businesses that invest in research and development (R&D).

Small claimants (annual turnover less than $20 million)

Refundable tax offset of the company tax rate plus 18.5 per cent
No cap on cash refunds

Larger claimants (annual turnover of $20 million or more)

Streamlined two-tiered intensity test
Non-refundable tax offset of the company tax rate plus:
- 8.5 per cent for R&D expenditure between 0 and 2 per cent R&D intensity; and
- 16.5 per cent for R&D expenditure above 2 per cent R&D intensity

All Claimants

Eligible R&D expenditure threshold increased from $100 million to $150 million per annum
Improvements to the administration, integrity and transparency of the R&D Tax Incentive
Changes apply from 1 July 2021

Changes to Fringe Benefits Tax (FBT) rules

Training courses provided by employers will now be exempt, even if the training isn't relevant to a worker's current role, this is to encourage companies to keep workers on in different roles within their business.
Record-keeping requirements will reduce for FBT.
Tax concessions currently available to small businesses with an annual turnover of up to $10 million will now be available to businesses with a turnover of up to $50 million.
The concessions include immediate deductions of start-up expenses and exemptions from FBT on car parking, phones and laptops provided to employees.

These measures are aimed at encouraging business to invest in their future and to help generate employment.

The access to prior year profits when losses are generated will help provide additional working capital for businesses to assist with future cashflows and investment.

Learn more

Want to learn more about the other announcements from the 2020 budget? We have broken the full budget down into 6 main categories for usability.

Source:

ABCNews, Federal Budget business boost tops $30 billin with immediate expensing, https://www.abc.net.au/news/2020-10-06/budget-2020-businesses-are-big-winners/12732362, accessed 7 October 2020

Commonwealth of Australia, Budget 2020-21, Jobmaker, https://budget.gov.au/2020-21/content/jobmaker.htm#five

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