Budget 2020: The Big Cash Slash.
Simon Byers, CPA & Partner of our Prahran Office, gives us his thoughts on the Budget 2020 which was announced by Australian Treasurer Josh Frydenberg yesterday.
Not since World War II have we seen this sort of spending from the government. It is all in an attempt to turnaround the Australian economy which, following the global pandemic, has seen its first recession in 30 years.
The numbers just don’t seem real…estimated debt will reach under $1 trillion before our economy is stabilised – representing around 44% of GDP in 2023/24. The cost of JobKeeper alone has blown out to over $102b this financial year. Our deficit is set to exceed $200b. But these numbers need to be considered in context and within the current context we find ourselves in.
Budget 2020: So what is in for you?
- 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. This removes the current $150,000 cap but please note, the motor vehicle depreciation limit still applies limiting claims for non-commercial motor vehicles to $59,136.
- 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 taking the deadline back to December 31st 2021.
- Eligible employers can claim a JobMaker Hiring Credit of up to $200 per week for each additional new job they create for an eligible employee from 7 October 2020 to 6 October 2021. The employee must have worked at least 20 hours per week, averaged over a quarter and received the JobSeeker Payment, Youth Allowance (Other) or Parenting Payment for at least one month out of the three months before they were hired.
- The apprenticeship wage subsidy will be further expanded by JobMaker allowing 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.
- Eligible companies with turnover up to $5b will be able to offset tax losses incurred in the 2019/20, 2020/21 or 2021/22 income years against 2018/19 taxed profits to generate a refund.
- Victorian business support grants will be made nonassessable, non-exempt income for tax purposes meaning this is now tax free.
- Businesses with turnover between $10m and $50m will have access to some existing small business tax concessions.
- 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.
- Individual income tax cuts for the 19% and 32.5% tax brackets will be brought forward two years to 1 July 2020, as will an increase to the low income tax offset.
The changes include:
– raising the 19% bracket from $37,000 to $45,000, and
– raising the 32.5% bracket from $90,000 to $120,000.
Planned removal of the low and middle income tax offset has been scrapped for one year.
- Two separate $250 economic support payments will be provided to eligible recipients of Centrelink payments and concession card holders. 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.
For those who get just as excited as us about Budget night, I have some good news. The normal Budget cycle should return in 2021 meaning we will doing this all again in May!
Business owners that are needing assistance in these challenging times, we encourage you to reach out to your trusted Highview advisor and see what is included in this Budget or other measures to help you through.
Individuals may want to sit down with our experienced financial planners to maximise these tax savings or other opportunities within this Budget.
Stay well all.
Simon Byers – Prahran Partner
Highview Accounting & Financial