The highly anticipated 2020-2021 Federal Budget brought plenty of financial wins and incentives as the Australian government looks to accelerate the economy.

Many of the Budget measures intend to generate more spending, increase economic growth, expand job opportunities and support businesses in the midst of the global pandemic.

Nearly every business in Australia is expected to benefit, so here’s highlights of the Budget outcomes you need to take note of.

Instant asset write-off

Depending on the size of your business, you will now be eligible for a level of asset write-off. This measure alone is expected to make a huge financial impact, with approximately 3.5 million Australian businesses having access to this incentive. This measure is designed to promote more spending from businesses, whether it be in equipment, furniture, fittings, transport equipment and more.

If your business has an annual turnover of less than $5 billion, you can now immediately write-off the cost of new and eligible assets bought or used between 7 October 2020 and 30 June 2022. You can also apply for full deductions off improvement costs to your assets already owned prior to this period.

If your yearly earnings fall between $50 million and $500 million, full deductions can be claimed for second-hand assets valued up to $150,000. These assets must be purchased by December 31, 2020 and fall under the current instant asset write-off scheme.

Finally, small businesses generating $50 million or less in revenue can apply ‘full expensing’ to all second-hand assets.

On top of these measures, the government’s current instant asset write-off scheme has been extended by six months to June 30, 2021. This will allow businesses earning up to $500 million per annum to first use and install their pre-existing assets in order to claim accelerated depreciation.

Tax incentives

Loss carry-back provisions

Eligible businesses with an aggregated turnover of up to $5 billion can now carry back their tax losses from the income years of 2019-20, 2020-21 and 2021-22. This will offset profits taxed in 2018-19 and later income years to then generate a refundable tax offset in the loss year. You must elect to receive this tax refund in your 2020-21 and 2021-22 tax returns.

Tax concessions

Eligibility for small business tax concessions have now been expanded to businesses with annual revenue of up to $50 million, instead of the previous $10 million. This means you can now access up to ten tax breaks, such as deductions off selected start-up and prepaid expenses, and simpler PAYG instalments and trading stock rules.

FBT exemptions

A number of fringe benefits tax (FBT) exemptions are available to eligible businesses.

Business owners who provide retraining and reskilling benefits to employees approaching redundancy, where the benefits aren’t related to their current employment, will receive a FBT exemption from 2 October 2020.

The small business tax concessions discussed above also include exemptions from FBT on car parking provided on your premises, and portable electronic work-related devices provided in the relevant FBT year.

Other incentives

There are further incentives which are expected to boost the cashflow into businesses, especially SMEs.

From a consumer’s perspective, personal income tax cuts have been brought forward two years and backdated to July 2020 to increase expenditure from households on various goods and services.  

Business owners will also find the wage subsidy scheme, or JobMaker Hiring Credit, appealing, as the measure rewards businesses that hire young, previously unemployed individuals. Specifically, weekly payments of $200 are provided when an eligible person aged 16 – 29 years is employed, or $100 for those aged 30 – 35.

Need advice?

It is important to get advice about how the latest Budget measures impact you.

There’s never been a more important time to work closely with your accounting and financial planning team. We’re happy to guide you through the process. Contact the team at Nitschke Nancarrow now.

Please note the government are continually updating us with information, so this is based on the information at hand today. We would suggest keeping an eye on the media for any additional support that may come out in the future and be of benefit to you.

The information contained on this article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.

Taxation, legal and other matters referred to on this website are of a general nature only and are based on Nitschke Nancarrow’s interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.

Nitschke Nancarrow specialises in accounting, tax and financial advice for superannuation. Contact us now for a no obligations discussion about your needs.

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