13 Oct Federal Budget 2020: What You Need to Know
The COVID-19 Pandemic has had a significant impact on Australians and the economy. The 2020 Federal Budget was delivered on the 6th of October, with Scott Morrison describing it as the Budget Australia needed. With support for economic growth as the top priority, the budget contains a range of measures to help individuals and businesses recover from the last six months. So what do you need to know about the Federal Budget, and how will it impact you?
Changes to personal income tax
The Government announced that the changes to the personal income tax rates scheduled to be made in 2022 would be brought forward to apply from the 1st of July 2020. These changes involve:
- Increasing the upper threshold of the 19% personal income tax bracket from $37,000 to $45,000
- Increasing the upper threshold of the 32.5% personal income tax bracket from $90,000 to $120,000
The Budget provides further relief for low-income earners through changes to the Low Income Tax Offset (LITO). The maximum LITO has been increased from $445 to $700. The current Low and Middle Income Tax Offset of up to $1,080 will continue to apply for the 2021 income year and is available in addition to the LITO for eligible taxpayers.
Changes affecting business taxpayers
To incentivise businesses to take on additional young job seekers, the Government has introduced a JobMaker Hiring Credit. Eligible employers will be able to claim $200 a week for every eligible employee hired from the 7th of October 2020 between the age of 16 and 29, and $100 a week for every employee hired between the age of 30 and 35.
To be eligible, the employee must:
- Work at least 20 paid hours per week
- Commenced their employment between the 7th October 2020 and 6th October 2021
- Have received the Job Seeker, Youth Allowance or Parenting Payment for at least one of the last three months before they were hired
Employers do not need to satisfy a fall in turnover test to access the JobMaker Hiring Credit; however, they must demonstrate that an additional job has been created and there has been an increase in the business’ total employee headcount.
Changes affecting companies
Companies with a turnover of less than $5 billion will be able to carry back tax losses from 2020, 2021 or 2022 income years to offset previously taxed profits made in or after the 2019 income year effectively allowing tax previously paid to be refunded. The tax refund is limited by requiring that the amount carried back is not more than the earlier taxed profits, and the carryback does not generate a franking account deficit. This will be available on the election by eligible companies when they lodge their tax returns for the 2021 and 2022 income years.
The Government has also announced changes to the Capital Allowance provisions. From 7:30 pm on the 6th of October 2020 until the 30th June 2022, businesses with an annual turnover of less than $5 billion will be able to claim an immediate deduction for the full cost of eligible depreciable assets of any value in the year they are first used or installed ready for use. The cost of improvements made during this period to an existing eligible asset can also be fully deducted.
If you have concerns or queries regarding the content of this blog, please don’t hesitate to contact your Conrad Carlile team online or on 07 3871 1522. As experts in all areas of accounting, taxation and business advice, we pride ourselves on customer service and helping our clients get the best outcome for their situation.