Warrnambool tax accountants explain the 2020-21 Federal Budget

Blessing Furusa is a Chartered Accountant (CA) based in our Warrnambool office. He focuses on helping small to medium business owners with their accounting world.

The 2020-2021 Federal Budget was announced this week under the cloud of COVID-19. The release of the budget itself was pushed out almost five months later than when it would usually occur, due to the impact of the Coronavirus.

Slated as an ‘economic recovery plan for Australia’, it acknowledges Australia’s budget will remain in deficit for some 10 years.

Below, we have initated some of what last year’s budget announcements included for small businesses and medium enterprises.

Keep in mind that what is outlined here is based on proposals only, and still need to be legislated. If you have any questions, Sinclair Wilson has tax and business experts in Warrnambool, Hamilton, Camperdown, Mount Gambier and Colac who are ready to explain how the latest Federal budget might impact your business.

Immediate tax write-off:

Businesses with annual turnover up to $5 billion can write off the full cost of eligible capital assets they acquire between 7:30pm AEDT on 6 October 2020 (i.e., Budget night)  and that are first used or installed for use by 30 June 2022.

Loss carry-back:

Additionally, companies with aggregated annual turnover of less than $5 billion will be able to apply tax losses from the 2019-20, 2020-21 and 2021-2022 income years against previously held taxed profits from the 2018-2019 and later tax years, by claiming a refundable tax offset in the loss year.

Increased access to small business tax concessions:

Businesses with a turnover between $10million and $50million are the target of a series of phased tax concessions introduced in last night’s Federal Budget.

These concessions will apply in three phases:

1. From 1 July 2020, eligible businesses can immediately deduct certain start-up expenses and some pre-paid expenditure. Speak to your Accountant to see if you are an eligible business, and what expenses it applies to.
2. From 1 April 2021, eligible businesses will be exempt from the Fringe Benefits Tax on car parking and multiple work-related portable electronic devices, such as the phones or laptops, that are provided to employees.
3. From 1 July 2021, eligible businesses will have access to the simplified trading stock rules.

They will also be able to 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.

Additionally, from 1 July 2021, the Commissioner of Taxation’s power to create a simplified accounting method determination for GST purposes will be expanded to apply to businesses below the $50million annual turnover threshold.

Temporary Insolvency Measures:

Up until 31 December 2020, the Federal Government will provide relief to financially-distressed businesses via:

1. A temporary increase in the threshold at which creditors can issue a statutory demand on a company from $2,000 to $20,000
2. A temporary increase in the time companies have to respond to statutory demands they receive – it was 21 days – until 31 December, they will have six months.
3. There will be temporary relief for directors from any personal liability for trading while insolvent, regarding any debts that occur in the ordinary running of the company’s operations

The Government will implement certain insolvency reforms, effective from 1 January 2021 (subject to the passing of legislation) to support small business, including the following:

• The introduction of a new streamlined process to enable eligible incorporated small businesses (broadly, those with liabilities of less than $1 million) in financial distress to restructure their debt.
• Simplifying the liquidation process for eligible incorporated small businesses (to allow faster and lower-cost liquidations, increasing returns for creditors and employees)
• Support for the insolvency sector (to ensure it can respond effectively to increased demand and to the needs of small business).

JobMaker Hiring Credit:

The Federal Government has introduced a $4 billion JobMaker scheme, which will, for the next 12 months, see employers paid up to $200 a week for each new job that is created and filled by a person between 16 and 35 years of age who was previously unemployed.

Designed to help fill the gap when JobKeeper ends in March 2021, the JobMaker Hiring Credit will be paid quarterly, in arrears.

Employers will receive $200 a week for any eligible new hires under 30 years of age, and $100 a week for new employees aged between 30 and 35 years.

The employees in question will need to work 20 hours a week or more, and have received the JobSeeker Payment, Youth Allowance (Other), or Parenting Payment for at least one of the previous three months before they are appointed to the new job.

Wage subsidy to employ new apprentices and trainees:

From 5 October 2020 to 30 September 2021, businesses that employee a new apprentice or trainee could be eligible for a wage subsidy to cover up to 50% of the apprentice or trainee’s wage.

Under the plan, up to $7000 would be available per quarter, per eligible trainee or apprentice. This would be capped at 100,000 places.

Wondering how any – or all – of these initiatives might impact your business? Contact Sinclair Wilson’s Business Advisors. We are here to help ensure you, as a business owner, get what you deserve.