The 2020-21 Federal Budget focuses on supporting Australia’s recovery from our biggest economic reverse since 1959. In addition to providing tax relief for individuals the Federal Government has announced a number of proposed measures to provide incentives for employers to hire and invest. Here we review the implications for Australian businesses.
According to the government Budget 2020-21 overview website the biggest item in the budget is the instant asset write-off to the value of $26.7 billion for companies with turnover of less than $5bn (about 99% of Australian businesses), aimed at encouraging investment.
Funds have also been assigned as employment incentives, especially for under-35 year olds who were previously unemployed ($4bn) and wage subsidies for new apprentices ($1.2bn). About $4.9bn has been assigned for a carry-back tax provision.
Planned Federal Government expenditure includes providing extra money to the states ($6.7bn) for infrastructure spending, along with Commonwealth road infrastructure funding of $2bn and a $1.5bn stimulus for the manufacturing sector.
Support for employing new staff
Incentives for employers to hire: A JobMaker Hiring Credit will be paid for a year to businesses who hire an eligible unemployed worker aged 16 to 35. The rate will be $200 a week for people under 30 and $100 a week for people between 30 and 35, and they must work at least 20 hours a week. The JobMaker Hiring Credit is aimed at filling the employment subsidy gap when the JobKeeper scheme ends in March 2021.
Support for apprenticeships and traineeships: A wage subsidy will reimburse eligible businesses for up to 50% of a new apprentice or trainee’s wages. Subsidies are capped at $7,000 per quarter, per eligible apprentice or trainee and limited to 100,000 places.
Improving business cash flow
Immediate tax write-off: Businesses with annual turnover of up to $5 billion can write off the full cost of eligible capital assets acquired from 7 October 2020 and first used or installed for use by 30 June 2022.
Small business tax concessions: Tax concessions currently available to small businesses with annual turnover up to $10 million have been extended to businesses with turnover up to $50 million. These businesses will be able to access up to 10 small business tax concessions, including deductions of certain start-up and prepaid expenses, as well as exemptions from the 47% Fringe Benefits Tax on car parking and work-related portable electronic devices, such as phones or laptops
Loss carry-back: Eligible companies with an annual turnover of less than $5 billion will be able to carry back tax losses from the 2019‒20, 2020‒21 or 2021‒22 income years to offset previously taxed profits in 2018‒19 or later income years. These companies will be able to apply tax losses against taxed profits in a previous year, generating a refundable tax offset in the year in which the loss is made.
New business development incentives
Research and development incentives: The government is providing an additional $2 billion through the R&D Tax Incentive. Small companies (with aggregated annual turnover of less than $20 million) will benefit from the refundable R&D tax offset set at 18.5% above the claimant’s company tax rate.
National digitisation plan: Overall, the government is investing a further $419 million to create a national directory, enabling small businesses to register for an ABN, ACN or a licence through a single channel. It will also invest $256 million to expand its Digital Identity system over the next two years with about $52 million is earmarked for cyber-security and digital capability program that will help small business.
Modern Manufacturing Strategy: With investment of $1.5 billion over five years to improve competitiveness, scale and resilience in Australian manufacturing this strategy will focus on six areas
- resources technology and critical minerals processing
- food and beverages
- medical products
- recycling and clean energy
The strategy is intended to address supply chain vulnerabilities, manufacturing modernisation, competitiveness and promoting growth.
Other regulatory support for business recovery
Insolvency reforms: Planned changes to bankruptcy and insolvency laws will give small business owners control of insolvency actions, enabling them to trade their way out of trouble. Where that is not possible, a simplified liquidation process will ensure greater returns to creditors and employees.
Changes to responsible lending laws: Reforms will make the credit application process easier for consumers and allow eligible borrowers to obtain credit faster, improving competition by making it easier for consumers to switch lenders and enhance access to credit for small business. This is expected to improve small business access to affordable bank loans to fund business recovery and growth activity in a post COVID-19 environment.
The information cited in this blog is sourced from government and media websites, and in no way reflects the opinions of Gallagher Australia.
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