The Federal Treasurer, Mr Josh Frydenberg, handed down the 2020/21 Federal Budget at 7:30 pm (AEDT) on 6 October 2020.
Australia’s economic response to the COVID-19 pandemic in the form of the original and extended JobKeeper scheme, the cashflow boosts and the enhanced JobSeeker payment has come at a significant cost, Mr Frydenberg said, resulting in a budget deficit of $213.7b, falling to $66.9b by 2023/24. The Budget has been described as an economic recovery plan, which is “all about jobs”.
The tax, superannuation and social security highlights are set out below.
INDIVIDUALS
Individual income tax cuts for the 19% and 32.5% tax brackets will be brought forward two years to 1 July 2020, meaning as of the 2020/21 income year the 19% threshold will be lifted from $37,000 to $45,000 and the 32.5% threshold lifted from $90,000 to $120,000. The low income tax offset increases from $445 to $700 starting 1 July 2020.The low and middle income tax offset will also be retained for an additional year, the maximum tax rebate remaining at $1,080.
A targeted capital gains tax exemption will apply for certain granny flat arrangements where there is a formal written agreement in place and the agreements are entered into because of family relationships or other personal ties (i.e. commercial rental arrangements will not qualify for the exemption). The exemption will have effect from 1 July 2021 (the first income year after the date of Royal Assent of the enabling legislation).
BUSINESS INCENTIVES AND COMPANIES
Business with aggregated annual turnover of up to $5b will be able to deduct the full cost of eligible depreciable assets of any value in the year they are installed. The full expensing period is available from 7:30pm AEDT on 6 October 2020 to 30 June 2022.
Small business depreciation pools may have up to 30 June 2022 to write-off their entire balances.
Companies with turnover between $50m and $500m given additional six months to comply with instant asset write-off provisions.
Businesses with turnover between $10m and $50m will have access to some existing small business tax concessions.
Eligible companies with aggregated turnover up to $5b will be able to offset tax losses incurred up to 2021-22 against prior year taxed profits in the 2018-19 or later income years. By making an election, eligible companies may receive a cash refund when they lodge their 2020-21 and 2021-22 tax returns. Certain limitations apply where the amount carried back cannot be more than earlier taxed profits and the carry back cannot generate a franking account deficit.
The research and development (R&D) tax incentive is proposed to change from 1 July 2021. Small R&D entities to be entitled to an offset of 18.5 percentage points above their tax rate with no refundable limit. Large R&D entities will have intensity tiers reduced from three to two, with offsets of 8.5 and 16.5 percentage points above their tax rate.
Eligible employers can claim a JobMaker Hiring Credit of up to $200 per week for each new job they create for an eligible employee from 7 October 2020 to 6 October 2021. For each eligible employee, employers will receive:
o $200 a week if they hire an eligible young person aged 16 to 29 years; or
o $100 a week if they hire an eligible young person aged 30 to 35 years.
Eligible young job seekers will have received JobSeeker Payment, Youth Allowance (Other) or Parenting Payment for at least one of the previous three months at the time of hiring.
The apprenticeship wage subsidy will be further expanded by JobMaker.
Companies that are incorporated offshore will be treated as Australian tax residents where there is a ‘significant economic connection to Australia’. This test will be satisfied where both the company’s core commercial activities and its central management and control is in Australia.
Victorian business support grants announced on 13 September 2020 will be made non-assessable, non-exempt income for tax purposes. This measure applies to payments made between 13 September 2020 to 30 June 2021.
FRINGE BENEFITS TAX
Applying from the date of announcement (29/9/2020), employer-provided retraining and reskilling for redundant, or soon to be redundant, employees will be exempt from fringe benefits tax, which is currently 47%.
Employers will be allowed to use existing corporate records, rather than employee declarations and other prescribed records, to finalise their fringe benefits tax (FBT) returns. The measure will have effect from the start of the first FBT year (1 April) after the date of Royal Assent of the enabling legislation.
SUPERANNUATION
Individuals will keep their existing superannuation fund when they change jobs. Employers will pay super to a new employee’s existing fund rather than creating a new account.
An interactive online comparison tool will help individuals decide on the best superannuation product to meet their needs.
From July 2021, APRA will conduct benchmarking tests on the net investment performance of MySuper products and prohibit underperforming products from receiving new members.
Superannuation trustees will be required to comply with a new duty to act in the best financial interests of members.
SOCIAL SECURITY
Two separate $250 economic support payments will be provided to eligible recipients. The first payment will be made from November 2020 and the second from early 2021. A one-off $1,500 pandemic leave payment will be made to eligible individuals who are unable to work and earn income while under a direction to self-isolate, quarantine or who are caring for someone who has tested positive to COVID-19.
The independence test for Youth Allowance and ABSTUDY will be temporarily revised from 1 January 2021. Young people who are seeking to qualify as independent for the purposes of assessing Youth Allowance (student) and ABSTUDY payment eligibility will also be provided with incentives to participate in seasonal work in the agricultural industry. Veterans’ disability pensions will be exempt from the income test for Commonwealth Rent Assistance (CRA) and income support payments.
The full Budget papers are available at http://www.budget.gov.au and the Treasury ministers’ media releases are available at ministers.treasury.gov.au.
If you have any queries, please do not hesitate to contact the team at Baskin Clarke Priest on 02 9389 1600 or at mailto:info@baskinclarkepriest.com.au.
Yours Sincerely,
Vanessa Priest & Kirsty McDonnell
Baskin Clarke Priest
Disclaimer:
This information has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. This information cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact Baskin Clarke Priest to discuss these matters in the context of your particular circumstances. Baskin Clarke Priest does not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information above or for any decision based on it.