2020-2021 Federal Budget Highlights
The Federal Budget is normally announced by the Treasurer in May each year. This year the Budget was delayed and introduced on the 6th October.
In the Government’s own words-
“Australians have experienced a year like no other”.
This blog is a summary of the Budget highlights, it is not intended to cover everything in the Budget.
Income tax rates – Key changes include:
- raising the 19% bracket from $37,000 to $45,000, and
- raising the 32.5% bracket from $90,000 to $120,000.
The proposed income tax brackets from 1.7.2020 are as follows.
| Minimum | Maximum | Tax on minimum | Tax rate on excess |
| — | $18,200 | — | 0% |
| $18,201 | $45,000 | — | 19% |
| $45,001 | $120,000 | $5,092 | 32.5% |
| $120,001 | $180,000 | $29,466 | 37% |
| $180,001 | and above | $51,666 | 45% |
- The above rates will apply until 30.6.2024.
BUSINESS TAX INCENTIVES
Temporary full expensing
Business will be able to deduct the full cost of eligible capital assets acquired from 6.10.2020 and first used or installed by 30.6.2022.
Full expensing in the year of first use will apply to new depreciable assets and the cost of improvements to existing eligible assets for businesses with aggregated annual turnover of less than $5 billion.
Full expensing also applies to second-hand assets for small and medium-sized businesses.
Temporary loss carry-back effective 1.7.2019
Under the existing rules, companies are required to carry losses forward to offset profits in future years.
The Government has announced that it will allow companies to carry back tax losses from 2019-20, 2020-21 or 2021-22 income years to offset previously taxed profits in the 2018-19 or later income years.
Eligible corporate tax entities can elect to apply tax losses against taxed profit in a previous year, generating a refundable tax offset in the year in which the loss is made.
The tax refund will be available on election by eligible companies when they lodge their 2020-21 and 2021-22 tax returns.
Removing Capital Gains Tax for Granny Flats
In a move aimed at supporting older and disabled Australians and their families, the Federal Government is providing a targeted Capital Gains Tax (CGT) exemption for granny flat arrangements where there is a formal written agreement in place.
The measure will commence as early as 1 July 2021 subject to the passing of legislation.
This change 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.
JobMaker Hiring Credit
From 7.10.2020, the Government will pay a hiring credit for up to 12 months for each new job. This is available from 7 October to employers who hire eligible employees age 16 to 35.
The credit will be paid quarterly in arrears at the rate of $200 per week for those aged16 to 29, and $100 per week for those aged 30 to 35. Eligible employees are required to work a minimum of 20 hours per week and receive the JobSeeker Payment, Youth Allowance or Parenting Payment for at least one month out of three months prior to when they are hired.
To be eligible, employers will need to demonstrate an increase in overall employee headcount and payroll for each additional new position created.
Please do not hesitate to contact us is you wish to discuss any aspect of the 2020 Budget.