Treasury Laws Amendment (A Tax Plan for the COVID-19 Economic Recovery) Bill 2020, which consists of five tax measures announced in Tuesday’s budget, has passed Parliament with the support of both major parties.
This means employers and employees could reap the benefits of Tuesday’s budget in weeks.
Personal income tax cuts
Under the changes, personal income tax cuts will be brought forward from their initial 2022 start date, while the LMITO — a one-off tax offset worth $1,080 to those earning from $50,000 to $90,000 — will be temporarily retained.
The package will see the top threshold of the 19 per cent personal income tax bracket lifted from $37,000 to $45,000, while the top threshold of the 32.5 per cent personal income tax bracket will rise from $90,000 to $120,000.
Temporary full expensing
The passage also marks the start of the new and improved instant asset write-off, meaning that as of 7.30pm (AEDT) on 6 October 2020 until 30 June 2022, businesses with turnover of up to $5 billion are able to deduct the full cost of eligible depreciable assets of any value in the year they are installed.
The $26.7 billion “game changer” essentially allows 99 per cent of businesses to write off the full value of assets acquired after Tuesday night and first used by mid-2022.
The way has also been paved for the introduction of the $4.8 billion measure that will allow businesses doing it tough as a result of the coronavirus to crawl back some of the tax paid on last year’s profits.
Companies with turnover up to $5 billion will now be allowed to offset losses against previous profits on which tax has been paid, to generate a refund.
The tax refund would be limited by requiring that the amount carried back is not more than the earlier taxed profits and that the carry-back does not generate a franking account deficit.
The tax refund will be available on election by eligible businesses when they lodge their 2020–21 and 2021–22 tax returns.
Tax concessions, including changes to FBT
Businesses with an aggregated annual turnover between $10 million and $50 million now have access to up to 10 small business tax concessions.
From 1 July 2020, eligible businesses will be able to immediately deduct certain start-up expenses and certain prepaid expenditure.
From 1 April 2021, eligible businesses will be exempt from the 47 per cent fringe benefits tax on car parking and multiple work-related portable electronic devices, such as phones or laptops, provided to employees.
From 1 July 2021, eligible businesses will be able to access the simplified trading stock rules, remit pay-as-you-go (PAYG) instalments based on GDP adjusted notional tax, and settle excise duty and excise-equivalent customs duty monthly on eligible goods. Eligible businesses will also have a two-year amendment period apply to income tax assessments for income years starting from 1 July 2021.
The government is providing an additional $2 billion through the research and development (R&D) tax incentive.
Under the new package, the $4 million cap on annual cash refunds will not proceed; instead small companies — those with aggregated annual turnover of less than $20 million — will see the refundable R&D tax offset set at 18.5 percentage points above the claimant’s company tax rate.
These changes will commence from 1 July 2021 and help more than 11,400 companies that invest in research and development to create the jobs of today and tomorrow.