The 2020-21 Federal Budget is all about jobs. The COVID-19 pandemic has resulted in the most severe global economic crisis since the Great Depression.
The centrepieces of the Budget are a new JobMaker Hiring Credit for businesses and lower taxes for individuals.
For the first time in several years, there were no measures specifically relating to SMSFs in this year’s Budget.
The COVID-19 economic recovery Bill containing several 2020-21 Federal Budget measures has now received assent with further measures expected to receive assent in the coming weeks.
The full Budget papers are available at www.budget.gov.au and the Treasury ministers' media releases are available at https://ministers.treasury.gov.au
The highlights are:
Individual income tax cuts brought forward two years to 1 July 2020. Meaning 19% threshold will be lifted from $37,000 to $45,000 and the 32.5% threshold lifted from $90,000 to $120,000. Note:
- Employers must make sure they update their payroll systems no later than 16 November.
- Employers don't need to adjust or refunds their employees for any over-withholding that occurred prior to the updates. This will be applied as credits when the employees lodge their 2020–21 income tax returns.
- In 2020–21, low- and middle-income earners will receive tax relief of up to $2,745 for singles, and up to $5,490 for dual income families, compared with 2017–18 settings. Planned removal of the low and middle income tax offset has been scrapped for one year.
- A targeted capital gains tax exemption will apply for granny flat arrangements where there is a formal written agreement in place.
Business incentives and companies
- Business with aggregated annual turnover of up to $5b will be able to deduct the full cost of eligible depreciable assets of any value in the year they are installed. The full expensing period is available from 7:30pm AEDT on 6 October 2020 to 30 June 2022. For Secondhand assets, up to 30 June 2021 only.
- Small business depreciation pools may have up to 30 June 2022 to write-off their entire balances.
- Companies with turnover between $50m and $500m given additional six months to comply with instant asset write-off provisions.
- Businesses with turnover between $10m and $50m will have access to some existing small business tax concessions.
- The research and development (R&D) tax incentive is proposed to change from 1 July 2021. Small R&D entities to be entitled to an offset of 18.5 percentage points above their tax rate with no refundable limit. Large R&D entities will have intensity tiers reduced from three to two, with offsets of 8.5 and 16.5 percentage points above their tax rate.
Eligible employers can claim a JobMaker Hiring Credit of up to $200 per week for each additional new job they create for an eligible employee aged 16 to 35 years, from 7 October 2020 to 6 October 2021. The total employee headcount must increase for the employer to be eligible. The employee must:
- Hired after the 7th of October and working an average of at least 20 hours per week
- be in receipt of income support payments (such as JobSeeker Payment, Youth Allowance (Other), or Parenting Payment) for at least one of the three months before they were hired.
- The apprenticeship wage subsidy will be further expanded by JobMaker.
- Eligible companies with turnover up to $5b will be able to offset tax losses against prior year taxed profits to generate a refund. The refund can’t be obtained until the FY21 (or FY22) tax return is lodged.
- Companies that are incorporated offshore will be treated as Australian tax residents where there is a significant economic connection to Australia.
- Victorian business support grants will be made non- assessable, non-exempt income for tax purposes.
- Australia will increase funding to strengthen its foreign investment framework.
Other tax measures
- Employer-provided retraining and reskilling for redundant, or soon to be redundant, employees will be exempt from fringe benefits tax.
- Employers will be allowed to use existing corporate records, rather than prescribed records, to comply with their fringe benefits tax obligations.
- Seven more organisations have been approved as specifically listed deductible gift recipients.
- The list of jurisdictions that have an information sharing agreement with Australia will be updated.
- The import duty waiver for certain medical and hygiene products used against COVID-19 will be extended.
- Individuals will keep their existing superannuation fund when they change jobs. Employers will pay super to a new employee’s existing fund rather than creating a new account.
- An interactive online comparison tool will help individuals decide on the best superannuation product to meet their needs.
- From July 2021, APRA will conduct benchmarking tests on the net investment performance of MySuper products and prohibit underperforming products from receiving new members.
- Superannuation trustees will be required to comply with a new duty to act in the best financial interests of members.
- Two separate $250 economic support payments will be provided to eligible recipients. The first payment will be made from November 2020 and the second from early 2021.
- A one-off $1,500 pandemic leave payment will be made to eligible individuals who are unable to work and earn income while under a direction to self-isolate, quarantine or who are caring for someone who has tested positive to COVID-19.
- The independence test for Youth Allowance and ABSTUDY will be temporarily revised from 1 January 2021. Young people who are seeking to qualify as independent for the purposes of assessing Youth Allowance (student) and ABSTUDY payment eligibility will also be provided with incentives to participate in seasonal work in the agricultural industry. Veterans’ disability pensions will be exempt from the income test for Commonwealth Rent Assistance (CRA) and income support payments