The 2020 Federal Budget has provided welcome relief for small to medium-sized businesses, delivering a range of tax breaks to help them weather the effects of the COVID-19 pandemic.
It’s likely your business clients will be looking to you as their accountant for support in navigating these measures, which Treasurer Josh Frydenberg called the “largest set of investment incentives” ever offered.
So, let’s explore the key tax incentives that can benefit businesses:
Instant asset write-off
This measure will help businesses drive productive capacity by increasing investment in fixed assets.
Businesses with an annual turnover of less than $5 billion will be able to fully write off the value of eligible assets.
The write-off will apply to assets purchased after the night of the Budget and first used or installed before June 30, 2022. It also applies to the cost of improvements made to existing depreciable assets.
In addition, businesses with an annual turnover of $50 million or less will be able to write off second-hand assets.
For more information on the instant asset write-off, please visit the ATO website.
Loss carry-back scheme
The scheme will help businesses offset losses incurred to 2021-22 against profits made in or after 2018-2019 .
Eligible businesses with an annual turnover of less than $5 billion will be able to apply current-year tax losses to recover tax paid in prior years.
Eligible businesses will receive a tax refund when they lodge their 2020-21 and 2021-22 tax returns.
For more information on the loss carry-back scheme, please visit the ATO website.
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JobMaker hiring credit
Designed to drive jobs growth as the JobKeeper wage subsidy winds down, the JobMaker hiring credit will help subsidise the wages of young employees hired by businesses.
Eligible businesses will receive up to $200 per week from the federal government for each new young employee they hire over the next 12 months. Like JobKeeper, payments will be passed on to employees.
To receive the JobMaker hiring credit, businesses will need to register with the ATO and make claims quarterly, with the first available from February 2021.
For more information on the JobMaker hiring scheme, including employer and employee eligibility criteria, please visit the ATO website.
Tax concessions for small business expanded
Previously these tax concessions were only available to small businesses with an annual turnover of $10 million. A range of tax concessions will be extended to those with an annual turnover of $50 million.
The concessions will be available to eligible businesses as follows:
- From 1 July 2020 – they can immediately deduct certain start-up expenses and certain prepaid expenditure.
- From 1 April 2021 – they will be exempt from the 47% fringe benefits tax on car parking and multiple work-related portable electronic devices provided to employees.
- From 1 July 2021 – they 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
For more information on the increased small business turnover threshold, please visit the ATO website.
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