What the Federal Government’s 2020/21 Budget means for business
The Australian Federal Government released their 2020/21 Budget, five months after it’s usual May release due to the ongoing Coronavirus pandemic.
Positioned as an ‘economic recovery plan for Australia’, the budget is focused on bolstering business and creating jobs as the country enters its first recession in 30 years.
Below we will discuss the key initiatives that have been announced and what that could mean for businesses.
Keep in mind that these initiatives are based on proposals and will need to be legislated before coming into effect.
By the numbers
- Budget Deficit – $213.7bn
- GDP – Negative 1.5% to 30 June 2021
- Net Debt – $703bn (35% of GDP) in FY 2020/21 – peaking at $966bn (44% of GDP) FY 2023/24
- Economic growth – 4.75% 2021/22 economic forecast
JobKeeper and JobMaker Hiring Credit
The federal government made no changes to the March 2021 end date of the JobKeep wage subsidy, however, introduced a new JobMaker scheme.
The new JobMaker scheme will be available for employers who take on young people aged 16 to 35 who are currently on JobSeeker. The subsidy will be $200 a week for new employees aged under 30 and $100 a week for those 30 to 35.
To be eligible, new hires must have been on JobSeeker and must be employed to work at least 20 hours a week.
All businesses except the big banks will be able to access the $4 billion credit scheme over the next 12 months, which the government predicts will support up to 450,000 jobs for young people.
JobTrainer Program for New Apprentices and Trainees
The federal government reconfirmed its commitment to the already announced $1 billion JobTrainer program for school-leavers providing more low-cost training places, and $1.2 billion towards wage subsidies for 100,000 new apprenticeships and traineeships.
Under the plan, businesses that employ a new apprentice or trainee could be eligible for a subsidy of up to 50% of an apprentice or trainees wage. This would be up to $7000 per quarter, per eligible trainee or apprentice.
Women’s Economic Security Statement
Unveiled in the Budget was the new Women’s Economic Security Statement which provides $240 million of funding measures focused on increasing jobs for women in traditionally male-dominated industries like construction.
Instant Asset Write Off
From the 6 October 2020 (budget night), businesses with an annual turnover of up to $5 billion will be able to write off the full value of any eligible capital assets they acquire and first use or have installed for use by 30 June 2022.
In addition, eligible businesses can deduct an additional 50 per cent of the asset cost in the year of purchases, noting that this is a timing rule where total depreciation is still limited to 100 per cent of an asset’s cost.
Accelerated Tax Cuts
The federal government’s three-stage tax plan announced in 2018, and then enhanced in 2019, has this year been accelerated with Stage two of it’s plan to begin immediately. Stage two plans include:
- The low-income tax offset (LITO) will increase from $445 to $700
- The top threshold of the 19% tax bracket will increase from $37,000 to $45,000. This will provide up to $1080 in tax relief
- The top threshold of the 32.5% tax bracket will increase from $90,000 to $120,000. This will provide tax relief of up to $1,350
The tax cuts will be back-dated to 1 July 2020, with refunds of withholding tax collected over the last four months to be built into wages until the end of this financial year.
Business Guarantees and Insolvency Measures
Under the Coronavirus Small and Medium Enterprises (SME) Guarantee Scheme, the government will guarantee 50 per cent of new loans provided by eligible lenders to SMEs.
The government will also offer additional financial-relief measures up until 30 December 2020 to businesses by implementing temporary insolvency measures, extending the time companies need to reply to statutory demands and providing temporary relief for directors from any personal liability for trading while insolvent.
Speak to a trusted accountant if your business is facing financial hardship to discuss these measures in detail.
Small business tax concessions
Small businesses with a turnover between $10 million and $50 million are the target of new staged tax concessions.
- From 1 July 2020, eligible businesses can deduct for certain start-up expenses and prepaid expenditure. Speak to a trusted accountant to see if you’re an eligible business and what expenses are deductible.
- From 21 April 2021, eligible businesses will be exempt from the 47% Fringe Benefits Tax on car parking and multiple work-related portable electronic devices that are provided to employees.
- From 1 July 2021, eligible businesses will have access to simplified trading stock rules.
Eligible businesses will also have the ability to remit PAYG instalments based on GDP-adjusted notional tax, and monthly settlement of excise duty and excise-equivalent customs duty on eligible goods.
There will also be a two-year amendment period applicable to income tax assessments for income years starting from 1 July 2021 for eligible businesses.
If you have any questions about what the Budget means for your business or to find out if you’re eligible for tax concessions or wage subsidies, Simmons Livingstone and Associates business advisors are here to help.