In delivering the budget, Treasurer Josh Frydenberg has announced significant tax relief for individuals and small businesses, including a number of other measures such as the JobMaker hiring credit, full expensing to build on the enhanced instant asset write-off, the second Women’s Economic Security Statement, a significant boost to mental health support and more.
“Australia’s prosperity has been described historically as ‘riding on the sheep’s back’, our economic recovery from this crisis will be riding on the back of Australia’s small business owners and operators,” said IPA chief executive Andrew Conway.
“But we need to create the right economic environment for them by encouraging consumer spending, making it easier to access capital and to give them the confidence to survive, grow and employ.”
Below are some of the most standout measures that are expected to provide the critical support small businesses need to build confidence to stay open, rebuild and start employing.
Tax relief for individuals
The government is bringing forward stage two of its personal income tax plan by two years. From 1 July 2020:
- 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; and
- the top threshold of the 32.5 per cent tax bracket will increase from $90,000 to $120,000.
The government will also provide additional targeted support to low- and middle-income Australians. In 2020-21, low-and middle-income earners will receive a one-off additional benefit of up to $1,080 from the low- and middle-income tax offset (LMITO).
According to the government, more than 7 million individuals are expected to receive tax relief of $2,000 or more for the 2020-21 income year compared with 2017-18 tax settings.
Low- and middle-income tax payers will receive relief of up to $2,745 for singles and $5,490 for dual income families.
Loss carry-back for businesses
The government is allowing companies with turnover up to $5 billion to offset losses against previous profits on which tax has been paid, to generate a refund.
Loss carry-back will be available to around 1 million companies that employ up to 8.8 million workers, according to Tuesday’s budget.
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.
“This will provide a targeted cash flow boost that businesses across the country desperately need,” said Mr Frydenberg.
“Normally, businesses would have to return to profit before they can use their losses, however, these are not normal times.”
This measure is estimated to deliver $4.9 billion in tax relief to businesses over the forward estimates, and $3.9 billion over the medium term.
Temporary full expensing
To support new investment and increase business cash flow, the government is providing a temporary tax incentive to around 3.5 million businesses that employ around 11.5 million workers.
As announced by the Treasurer, from 7:30pm (AEDT) on 6 October 2020 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. The cost of improvements to existing eligible depreciable assets made during this period can also be fully deducted.
This measure is estimated to deliver $26.7 billion in tax relief over the forward estimates, and $3.2 billion over the medium term.
R&D incentives
The government is providing an additional $2 billion through the Research and Development Tax Incentive.
Under the new package, the proposed $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.
JobMaker Hiring Credit
The government’s new JobMaker Hiring Credit is expected to help accelerate growth in employment during the recovery by giving businesses incentives to take on additional employees that are young job seekers aged 16 to 35 years old.
Under this measure, businesses will receive the JobMaker hiring credit of $200 per week for every worker aged up to 30 and $100 a week if they hire an eligible young person aged 30 to 35 years, payable for the next 12 months for new hires who work at least 20 hours per week.
The JobMaker Hiring Credit is estimated to support around 450,000 positions for young people and cost $4 billion from 2020-21 to 2022‑23.
Mental health aid
The government will provide $7.0 million in 2020-21 to support the mental health and financial wellbeing of small businesses impacted by COVID-19, including:
- $4.3 million to provide free, accessible and tailored support for small business owners by expanding Beyond Blue’s NewAccess program in partnership with the Australian Small Business and Family Enterprise Ombudsman; and
- $2.2 million to expand a free accredited professional development program that builds the mental health literacy of trusted business advisers so that they can better support small business owners in times of distress, delivered through Deakin University.
Tax concessions, including changes to FBT
Businesses with an aggregated annual turnover between $10 million and $50 million will have access to up to 10 small business tax concessions as part of the 2020–21 budget.
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.
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 $50 million aggregated annual turnover threshold.
$1.2bn to help employ 100,000 new apprentices
The government is investing an additional $1.2 billion to help Australian businesses employ 100,000 new apprentices or trainees.
The subsidy will be available to employers Australia-wide who engage an Australian apprentice or trainee from 5 October 2020 until the 100,000 cap is reached.
Employers will be eligible for 50 per cent of the wages for a new or recommencing apprentice or trainee for the period up to 30 September 2021, up to $7,000 per quarter.
$1.5bn strategy to prop up manufacturing
$1.5 billion in new funding will be invested over the next four years to make Australian manufacturers more competitive through the economic recovery from COVID-19.
The main element of the $1.5 billion Modern Manufacturing Strategy is the $1.3 billion Modern Manufacturing Initiative, which will support projects within six National Manufacturing Priorities, including resources technology and critical minerals processing; food and beverage; medical products; recycling and clean energy; defence; and space.
$800m digital plan
$800 million is being invested to push businesses towards adopting digital technologies to grow their business and help the post-COVID economic recovery.
The big-ticket items of the government’s Digital Business Plan include $419.9 million towards the full implementation of the Modernising Business Registers (MBR) program, allowing businesses to quickly view, update and maintain their business registry data in one location.
An additional $256.6 million will go towards developing a digital identity system to enable more secure and convenient engagement with government services, while $28.5 million will be invested in supporting the rollout of the Consumer Data Right to the banking and energy sectors.
In relation to small businesses, $22.2 million will be spent on supporting small business operators take advantage of digital technologies through an expansion of the Australian Small Business Advisory Service – Digital Solutions program, a Digital Readiness Assessment tool and a Digital Directors training package.
