What the Federal Budget means for employers

Employers will have access to incentives, hiring credits and tax concessions under the Federal Budget handed down on 6 October 2020.

Under the Budget measures, more than $30 billion in tax relief is targeted at business.

However, many of the business tax cuts are temporary measures and follow the impacts of COVID-19 on many businesses.

These are some of the main Budget measures that may affect employers:

JobMaker Hiring Credit

The $4 billion JobMaker scheme will subsidise employers to hire workers aged 35 and under.

Under the scheme, employers will receive a credit for each new job they create, if they hire someone between 16 and 35 years old.

The credit will be $200 per week for 16- to 29-year-olds, and $100 for 30- to 35-year-olds.

It will be payable for up to 12 months for each new job and is available from 7 October 2020 to employers who hire eligible employees.

Eligible employees are required to work a minimum of 20 hours per week.

Businesses will also need to prove that it's a new job, by showing they've increased their overall headcount and payroll bill.

Skills and training

The Government announced it aimed to create 100,000 new apprenticeships and traineeships, with a 50% wage subsidy for businesses who employ them.

The extra subsidised apprenticeships fall under the Government’s JobMaker Plan.

Immediate expensing and instant asset write-off

As part of new Budget measures, businesses with aggregated annual turnover of up to $5 billion will be able to deduct the full cost of an eligible asset in the first year it is used or installed up until 30 June 2022.

Under normal asset depreciation rules, a portion of an eligible asset would have been tax deductable in the first year and the rest would have been depreciated over future years.

The measure means the full amount of an asset can now be claimed as a tax deduction up front, which is aimed at reducing the amount of tax a business will pay.

In the Budget, the instant asset write-off, which had already been expanded as part of the Government’s response to the pandemic, was also extended by six months.

Under the instant asset write-off, businesses with turnover of up to $500 million can instantly write-off multiple assets worth up to $150,000 each.

Business will have until 30 June 2021, an extra six months, to use or install assets purchased by 31 December 2020.

Loss carry back

Under a temporary measure, businesses will not have to wait until they next post a profit to claim any losses suffered as a tax offset.

Under the temporary carry-back measure announced in the Budget, companies with a turnover of up to $5 billion will instead receive a cash refund of taxes paid on previous profits if they post a loss.

The loss carry-back applies to business losses in the 2019, 2020 or 2021 financial years and can be offset against profits they made and taxes paid from 2019 onwards.

Fringe Benefits Tax – exemption to support retraining and reskilling

Under measures announced before and as part of the 6 October Federal Budget, employer-provided retraining and reskilling for employees who are redeployed to a different role in the business will be exempt from Fringe Benefits Tax (FBT).

FBT was previously payable if an employer provided training for employees that was not sufficiently connected to their current employment. However, the change is aimed at encouraging employers to help workers transition to new employment opportunities within or outside their business.

Other tax concessions

Under the Budget, some other tax concessions currently available to small businesses with an annual turnover of up to $10 million will now be available to businesses with a turnover of up to $50 million.

The expanded concessions will apply in three phases, some of which have already commenced:

• From 1 July 2020, eligible businesses have been able to deduct certain start-up expenses and certain prepaid expenditure.
• From 1 April 2021, eligible businesses will be exempt from the 47% FBT 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.

Please note that this announcement is yet to be legislated and may be subject to change. You can access all Budget papers here, and access QSuper’s summary of Budget announcements here.