2020 Budget – What’s in it for you and your business?

Author: Tony Rule, Partner, TAG Financial Services

The 2020 Federal Budget is a combination of the Old and the New.  Perennial favourites such as asset write offs, apprentice and trainee subsidies, individual tax cuts and infrastructure spending projects are supplemented by fresh initiatives including temporary recoupment of company tax losses and the scrapping of recently introduced laws around responsible lending to free up credit for small and medium business owners.    

The Government clearly wants us to spend our way out of the recession and they are leading the way with the biggest spending budget in living history.

The 2020 Budget is providing business owners with some great opportunities – if you are in a strong enough position to take advantage of what’s on offer.  The Coronavirus handouts will come to an end and businesses will be motivated through the provision of incentives to invest in people and assets.  Here are the key points for business owners:

JobKeeper – there have been no new announcements in relation to JobKeeper and so the previously announced reductions in JobKeeper from October 2020 and January 2021 remain in place with JobKeeper ceasing in March 2021.

JobMaker – from Budget night for a period of 12 months, employers will receive $200 per week (up to $10,400) if they hire an employee for more than 20 hours per week under the age of 30 who was receiving JobSeeker, Youth Allowance or Parenting Pay prior to employment.  A payment of $100 per week will be paid for a new employee aged between 30 and 35 years.

Asset Purchases – from budget night to 30 June 2022, all businesses will get a full tax deduction for new depreciable asset purchases (and the costs of improvements to existing eligible assets) in the year they are first used or ready for use.   Businesses with turnover less than $50m will be able to deduct the full cost of second hand assets through this period. 

Recoupment of Taxes Paid – companies will be able to offset tax losses incurred in the years ended 30 June 2020, 30 June 2021 and/or 30 June 2022 against profits made in the year ended 30 June 2019 or later.  This offset should result in a refund of taxes paid when the 2021 and/or 2022 tax returns are lodged.  This refund of taxes paid includes the situation where a company makes a tax loss as a result of the write off of one or more asset purchases as noted above.  The loss amount carried back should not be able to exceed the earlier taxed profits or generate a franking deficit.

Business Grants – announced for Victorian Businesses after 13 September and paid before 30 June 2021 will be non-assessable.

Research & Development – from 1 July 2021, the Research and Development Tax Incentive for companies turning over less than $20m will increase the refundable R&D tax offset to 18.5 percentage points above the claimant’s company tax rate and there will be no $4m cap on annual cash refunds.

Fringe Benefits Tax – The record keeping rules around FBT will be simplified from 1 April 2021 to allow employers to use existing records of the business rather than requiring employee declarations to prove (say) living away from home declarations or a travel diary where the business already has an appropriate level of records.   Where an employer retrains an employee that is being made redundant, that training cost will no longer be subject to FBT.

Personal Tax Cuts – from 1 July 2020, income tax rates for individuals have been reduced.  Low and middle income earners will receive tax relief of up to $1,042 per year ($20 per week) and high income earners over $120,000 will receive up to $2,392 per year ($46 per week) based on tax rates that were applicable up to 30 June 2020. The government has also increased the low income offset from $445 to $700 from 1 July 2020.

Responsible Lending Rules – established following the subprime loan crisis in 2009 will be dropped to reduce onerous credit rules for lenders and encourage the flow of loans to boost the economic recovery.  Whilst improving lending conditions, there will be a shift from “lender beware” back to “borrower beware” which will need to be monitored.

More Access to Tax Concessions – businesses with turnover less than $50m can now access small business tax concessions (previously available for small businesses up to $10m) providing tax relief and reducing red tape in the following areas:

From 1 July 2020:

  • immediate deductions for eligible start-up expenses
  • immediate deductions for eligible prepaid expenditure

From 1 April 2021:

  • exemption from fringe benefits tax on car parking provided to employees
  • exemption from fringe benefits tax on multiple work-related portable electronic devices (e.g. phones or laptops) provided to employees

From 1 July 2021:

  • simplified trading stock rules
  • remit pay as you go instalments based on GDP
  • adjusted notional tax for PAYG Instalments.
  • settle excise duty monthly on eligible goods
  • settle excise-equivalent customs duty monthly on eligible goods
  • two-year amendment period for income tax assessments for income years starting from this date
  • the Commissioner of Taxation will have the power to create a simplified accounting method determination for GST purposes for these businesses

There’s always devil in the detail and we will keep you posted as more information rolls out.

If you have any questions in relation to the 2020 Budget and how it will affect you and your business, please do not hesitate to contact us on 03 9886 0800 or via email.

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Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686). Copyright 2020. Please do not reproduce without the expressed written consent of the author.