Latest Tax News and Budget Announcements
The 2020-21 Budget delivered a range of incentives for businesses to invest.
If you would like us to review your position and the tax impact of any investments you are contemplating, please contact us at firstname.lastname@example.org or 07 3510 1500 and we can assist you to get the best possible outcome.
The following is a summary of where things are at with some of the big-ticket Budget items.
JobMaker Hiring Credits: What We Know So Far
The JobMaker hiring credit announced in the 2020-21 Federal Budget. The legislation enabling the JobMaker scheme has not passed Parliament as yet and until this occurs, the JobMaker rules are not certain and may change. More details should be available soon and we’ll let you know as soon as we have some certainty. Here is what has been announced so far:
What is JobMaker?
JobMaker is a credit available to eligible businesses for hiring additional employees (not if you are merely replacing someone who left). The hiring credit is available for jobs created from 7 October 2020 until 6 October 2021.
The credit provides:
- $200 per week for new employees between 16 to 29 years of age, and
- $100 a week for new employees between 30 to 35 years of age.
Payment is from the start date of the employee for 12 months.
When do the credits start?
Assuming the legislation passes Parliament and your business and the employee are eligible, and the ‘additionality’ test is passed, credits can be claimed for employees hired from 7 October 2020 until 6 October 2021. The credit will be claimed quarterly in arrears by the employer from the ATO from 1 February 2021. The credit is an incentive for the employer to support wage costs and not passed onto the employee.
For an extended article on JobMaker, including frequently asked questions, visit our blog on JobMaker Hiring Credits.
Tax deductions for investing in your business
Stimulating investment spending is high on the Government’s agenda. To encourage spending, the 2020-21 Budget introduced a measure that allows businesses with turnover under $5bn* to immediately deduct the cost of new depreciable assets and the cost of improvements to existing assets in the first year of use. This means that an asset’s cost will be fully deductible in the year it’s installed ready for use, rather than being claimed over the asset’s life. And, there is no cap on the cost of the asset.
When it comes to second-hand assets the rules are a bit different depending on the size of the business. Businesses with an aggregated turnover under $50 million can claim an immediate deduction for the cost of second-hand assets under the new measures.
Businesses with aggregated annual turnover between $50 million and $500 million can still deduct the full cost of eligible second-hand assets costing less than $150,000 that are purchased by 31 December 2020 under the existing enhanced instant asset write-off. Businesses that hold assets eligible for the enhanced $150,000 instant asset write-off will have an extra six months, until 30 June 2021, to first use or install those assets.
For an extended article on Immediate Asset Write-offs for business, visit our blog on Tax Deductions.
Refunds for Business Tax Losses
If your company has made a loss, you may be able to claim a tax refund for tax previously paid on profits.
In the 2020-21 Federal Budget, the Government announced that businesses with turnover under $5bn* will be able to offset any losses made between 2019-20 and 2021-22 against previously taxed profits between 2018-19 and 2020-21.
The loss carry-back rules enable a company to offset tax losses against profits taxed in a previous year, generating a refundable tax offset. The amount carried back can be no more than the earlier taxed profits, limiting the refund to the company’s tax liabilities in the profitable years. The company can choose to carry-back a loss or carry it forward. That is, tax losses for 2019-20, 2020-21, or 2021-22 income years can either be:
- Carried forward and deducted against income derived in later income years; or
- Carried back against income of earlier income years as far back as the 2018-19 income year to produce a refundable tax offset.
Previously, tax losses could only be carried forward and deducted against income in later income years.
Tax table reminder
The 2020-21 personal income tax cuts announced in the Federal are now law. Employers need to ensure that the tax withheld from employee salaries is correct. The ATO has published updated tax tables that apply from 13 October 2020. Employers have until 16 November 2020 to implement the changes.
For an extended article on refunds and tax losses, visit our blog on refunds for tax losses.
JobKeeper Clawback Begins
At the recent Senate Estimates hearing, Jeremy Hirschhorn, the ATO’s Second Commissioner, stated that $120 million in JobKeeper payments had been clawed back from those either deliberately seeking to rort the system or who had made reckless mistakes.
Mr. Hirschhorn went on to say that there did not appear to be widespread fraud across the Government’s stimulus measures and most mistakes were honest. In the cases identified so far, JobKeeper had not been clawed back from employers making honest mistakes but these employers were prevented from making future claims.
In September, the ATO noted that compliance checks had halted 55,000 JobKeeper applications at the very first stage, because they did not meet the eligibility criteria, and delayed $1bn in payments to more than 75,000 applicants for further review.
Eleven matters have been referred to as Serious Financial Crime Taskforce operations and around 50 matters referred for criminal investigation. But overall, the Tax Commissioner stated, “the vast majority of Australians have done the right thing and only claimed the amounts they were entitled to.”
Source: Knowledge Shop Newsletter October 2020