The long awaited delay of the 2020 budget due to COVID -19 was delivered on Tuesday night. For business, it is aimed at stimulating the economy. For individuals, bringing forward promised tax relief in the form of tax reduction.

Below is a summary of the budget that impacts my business and personal clients:

Temporary Loss Carry-Back Measure

The tax losses regime will be amended to temporarily allow a refund for tax paid in previous years. Under the current rules, tax losses incurred in an income year can only be carried forward and applied against future profits in a later income year. However, assuming the proposed changes are legislated, it will be possible for losses that are incurred in the income years 2019-20, 2020-21 or 2020-22 to instead be retrospectively applied against profits that have already been taxed in the 2018-19 year or later years.

If COVID-19 resulted in 2019-20 being a bad year for a business and it suffered $1 million in losses, but the business had a good year in 2018-19 with a taxable profit of $500,000, the taxpayer can apply $500,000 of its losses against its previous taxable income – which will generate a refundable tax offset for the 2019-20 year.

Importantly, the measure is only proposed to apply to corporate tax entities, so trusts, partnerships or sole traders are unlikely to see any benefit from these changes. There is also a turnover limit of $5 billion. The measure is expected to increase the benefit of the Government’s expanded instant asset write off measure, as the increased deductions generated by that measure may still provide an immediate benefit for eligible companies even if it increases their losses for a current year.

Greatly Expanded ‘Instant Asset Write-Off’ Rules

An immediate deduction will be available for ‘eligible capital assets’ acquired from 7.30pm AEDT on 6 October 2020 that are first used or installed by 30 June 2022. The measure applies to all businesses with an aggregated turnover of under $5 billion.

Eligible capital assets include new depreciable assets and certain improvements to existing assets. For businesses with an aggregated turnover of less than $50 million, the list also includes second-hand assets.

Jobmaker Hiring Credit

In the interests of promoting employment, a JobMaker hiring credit will be introduced. The key aspects to this measure are:

  • eligible employers will be entitled to a cash payment for each new eligible employee they hire from 7 October 2020;
  • a payment of $200 per week over 12 months (up to $10,400 per new job) for a new employee aged 16 to 29 years; and
  • a payment of $100 per week over 12 months for a new employee aged 30 to 35 years.

For the employer to be eligible, the employee will need to have worked for a minimum of 20 hours per week, averaged over a quarter, and received either the JobSeeker Payment, Youth Allowance (other) or Parenting Payment for at least one month out of the three months prior to when they were hired.

Changes to Personal Income Tax Rates 

Stage 2 of the Government’s ‘Personal Income Tax Plan’ arrives early, and applies retrospectively from 1 July 2020. Under these changes:

  • the income threshold for the 19 per cent personal income tax bracket will increase from $37,000 to $45,000; and
  • the income threshold for the 32.5 per cent personal income tax bracket will increase from $90,000 to $120,000.

Stage 3 of the Personal Income Tax Plan remains unchanged and commences in 2024-25 as legislated.

Should you have any questions regarding any of the above or anything contained in the budget please contact my staff or myself and we will be willing to assist.