Learn what it means for small to medium businesses
The federal government handed down one of the most eagerly anticipated budgets in history, setting out its plans to help our country rebuild from COVID-19, despite also revealing the worst economic conditions since the Great Depression.
Key business and income tax cuts
Individual tax rates:
As expected, the adjustments to tax rates that were originally due for implementation in the year ending 30 June 2023 have been brought forward to apply from 1 July 2020. For residents this means:
- The low-income tax offset will increase from $445 to $700,
- The top threshold of the 19 per cent tax bracket will increase from $37,000 to $45,000,
- The top threshold of the 32.5 per cent tax bracket will increase from $90,000 to $120,000.
Additional targeted support will also provide support to low- and middle-income Australians, who will receive a one-off additional benefit of up to $1,080.
Big benefits for business include:
• Increasing the small business entity threshold from $10 million to $50 million. This will enable around 20,000 businesses to access a range of new tax concessions.
• Changes to the research and development tax incentive that will deliver more value to companies claiming the concession.
• Temporary full expensing of capital assets. From budget night until 30 June 2022, businesses with turnover up to $5 billion will be able to deduct the full cost of eligible depreciable assets of any value in the year they are installed.
• Temporary loss carry-back. This will allow companies with turnover up to $5 billion to offset losses against previous profits on which tax has been paid. Losses incurred up to 2021-22 can be carried back against profits made in or after 2018-19. Eligible companies may elect to receive a tax refund when they lodge their 2020-21 and 2021-22 tax returns.
What Happens Next?
The key business and income tax cuts contained in the federal budget have been bundled into a single piece of legislation with the aim of pushing them through the lower house of Parliament this week and, if possible, the Senate.
You can access the budget papers here:
The budget for the 2021–2022 fiscal year will be handed down in around six months time. That budget will make for compelling reading too.
Get in touch if you’d like to find out more about how these very significant tax concessions and changes may impact your business.
Give us a call on 07 5649 7650.
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