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The 2020 Federal Budget was handed down on Tuesday 6 October. Following is a summary of the headline measures.

BUSINESS

Extension of the Instant Asset Write-Off – businesses with aggregated annual turnover of less than $5 billion will be able to deduct the full cost of eligible capital assets acquired from 7:30pm AEDT on 6 October 2020 (Budget night) and first used or installed by 30 June 2022.

“Full expensing” in the year of first use will apply to new depreciable assets and the cost of improvements to existing eligible assets. For small- and medium-sized businesses (with aggregated annual turnover of less than $50 million), full expensing also applies to second-hand assets.

Loss Carry-Back – companies that have paid tax in the past, but that are now in a tax loss position, will be permitted to carry their loss back to those past years to obtain a refund of some of the tax they previously paid. This measure will enable many distressed companies to claim back the taxes they paid on their pre-COVID-19 profits against losses they are incurring during the current downturn.

Specifically, companies with an aggregated annual turnover of less than $5 billion, will be permitted to carry-back losses from the 2019–20, 2020–21 and 2021–22 income years against tax paid in the 2018–19, 2019–20 or 2020–21 income years.

The tax refund would be limited by requiring that the amount carried back is not more than the earlier taxed profits. The tax refund will be available on an election basis by eligible businesses when they lodge their 2020-21 and 2021-22 tax returns. Companies that do not elect to carry back losses under this measure, can still carry losses forward as normal.

FBT Exemptions to Support Training and Re-Skilling – an FBT exemption will be introduced for retraining and reskilling benefits provided by employers to redundant, or soon-to-be redundant, employees where the benefits may not be related to their current employment.

Hiring Credit for Employers – a new JobMaker Hiring Credit scheme will be available to employers from 7 October 2020 for each new job they create over the next 12 months for which they hire an eligible young person. For each eligible employee, employers will receive for up to 12 months:

• $200 a week if they hire an eligible young person aged 16 to 29 years; or
• $100 a week if they hire an eligible young person aged 30 to 35 years.

The new employees must have received JobSeeker Payment, Youth Allowance (other) or Parenting Payment for at least one of the previous three months at the time of hiring. Employers must demonstrate that they have increased their overall employment to receive this payment for up to 12 months for each position created. To claim the credit, employers need to report their employees’ payroll information to the ATO via Single Touch Payroll.

Expanded Access to Small Business Tax Concessions – access will be expanded to a range of small business tax concessions. Under the changes, businesses with an annual aggregated turnover of less than $50 million (up from $10 million) will have access to a range of concessions including:

• immediate deduction for certain start-up expenses;
• immediate deduction for certain prepaid expenses;
• FBT exemption for car-parking benefits;
• FBT exemption for multiple portable electronic devices (laptops, tablets etc.);
• simplified trading stock rules;
• two-year amendment period;
• simplified accounting method access for GST purposes.

Note that access to the small business CGT concessions has not been expanded, and remains at an aggregated turnover of less than $2 million, or less than $6 million in net assets.

INDIVIDUALS

Tax Cuts – reductions in individual tax rate thresholds will apply for the 2020-21 income year. That is, from 1 July 2020:

• the top threshold of the 19% personal income tax bracket will be increased from $37,000 to $45,000
• the top threshold of the 32.5% personal income tax bracket will be increased from $90,000 to $120,000.

This brings forward changes previously legislated to commence from the 2022-23 income year. By way of illustration, this will result in an annual tax saving of $1,080 for individuals with a taxable income of $50,000; a saving of $1,530 for those earning $100,000; and a saving of $2,430 if you are earning $150,000.

CGT Exemption for ‘Granny Flat’ Arrangements – from 1 July 2021, CGT will not apply to the creation, variation or termination of a granny flat arrangement providing accommodation where there is a formal written agreement in place. This will apply to arrangements that provide accommodation for “older Australians or those with a disability”. The exemption will only apply to agreements that are entered into because of “family relationships or other personal ties” and will not apply to commercial rental arrangements.

SUPERANNUATION

Unlike recent years, there were no taxation or contribution-related reforms in the Budget, however a broad package of measures was announced aimed at improving the superannuation system by:

• Having your superannuation follow you – preventing the creation of unintended multiple superannuation accounts by ensuring that individuals automatically keep their superannuation fund when they change employers.
• Making it easier to choose a better fund – individuals will have access to a new interactive online comparison tool which will encourage funds to compete harder for members’ savings.
• Holding funds to account for underperformance – to protect members from poor outcomes and encourage funds to lower costs, the Government will require superannuation products to meet an annual objective performance test. Those that fail will be required to inform members. Persistently underperforming funds will be prevented from taking on new members.

Josh McMullen is a senior tax writer at PT Partners.