Employers win tax concessions in Federal Budget

More than $30 billion in tax breaks for businesses were announced in the Australian Government’s 6 October Budget.

The Australian Government said business were being supported with time-limited tax incentives to generate economic activity and create jobs by lowering the cost of investment.¹

What the Federal Budget means for employers

Following the impacts of the COVID-19 health pandemic lockdowns and restrictions, employers will have access to measures announced in the Budget including:

• New JobMaker Hiring Credit scheme aimed at encouraging employers to take on younger employees
• New apprenticeships and traineeships and a 50% wage subsidy for businesses who employ them
• Tax relief including allowing eligible businesses to deduct the full cost of eligible depreciable assets of any value in the year they are installed
• Tax relief allowing eligible companies to offset losses against previous profits on which tax has been paid to generate a refund and provide cashflow support
• Tax concessions including Fringe Benefit Tax for employer-provided retraining and reskilling for employees.

Tax boosts for business

The Government said its Budget tax relief measures included expanding on the instant asset write-off that was announced in response to COVID-19.

As a result, 99% of businesses would be able to write off the full value of assets they purchase. Businesses with a turnover of up to $5 billion would be able to immediately deduct the full cost of eligible depreciable assets acquired from 7:30pm on 6 October 2020 and first used or installed by 30 June 2022.

The Government said it would also temporarily allow companies with a turnover of up to $5 billion to offset tax losses against previous profits on which tax has been paid.

Normally, businesses would have to return to profit before they can use their losses.

“However, these are not normal times,” Treasurer Josh Frydenberg said in his Budget speech.

Losses incurred to June 2022 would be able to be offset against prior profits made in or after the 2018-19 financial year.

Tax concessions extended to businesses with a turnover of up to $50 million

The Government said it would expand access to 10 small business tax concessions by lifting the aggregated annual turnover threshold for businesses eligible for these concessions from $10 million to $50 million.

It means businesses with an aggregated annual turnover between $10 million and $50 million will be able to access up the 10 small business tax concessions.

The changes aimed to reduce red tape and help businesses to attract workers and retain jobs.

The expanded concessions will apply in three phases, with the first phase starting from 1 July 2020.

The Government said it would also enhance previously announced reforms to invest an additional $2 billion through the Research and Development Tax Incentive.

These changes will commence from 1 July 2021 and help more than 11,400 companies that invest in research and development.

1. Media Release, 6 October 2020, Treasurer Josh Frydenberg, Tax relief to back hard-working Australians and to create more jobs at www.ministers.treasury.gov.au.