Extended instant asset write-off

The instant asset write-off is being temporarily extended. From 7:30pm (AEDT) on 6 October 2020 until 30 June 2022, businesses with turnover of 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.

For small and medium sized businesses (aggregated annual turnover of less than $50 million), full expensing also applies to second-hand assets.

Larger business entities (turnover > $50 million) can still deduct the full cost of eligible second-hand assets costing less than $150,000 that are purchased by 31 December 2020 under the current rules.

Businesses that acquired eligible assets for the pre-existing enhanced $150,000 instant asset write off prior to 31 December 2020 will have an extra six months, until 30 June 2021, to first use or install those assets.

Small businesses will be able to deduct the balance of their simplified depreciation pool at the end of the income year while full expensing applies. The five-year limitation period where a small business entity opts out of this regime will continue to remain suspended.

Small business loss carry back
Companies with turnover up to $5 billion will be allowed to offset losses against previous profits on which tax has been paid, to generate a refund. Eligible companies can carry back tax losses from the 2019-20, 2020-21 or 2021-22 income years to offset previously taxed profits in 2018-19 or later income years.

Companies may elect to receive a tax refund when they lodge their 2020-21 and 2021-22 tax returns. The refund will be limited by requiring that the amount carried back is not more than the earlier taxed profits, and that the carry back does not cause a franking account deficit.
Currently, companies are required to carry losses forward to offset profits in future years. Companies that do not elect to carry back losses can still carry losses forward as normal.

Expanded small business tax concessions
The Government is expanding access to a range of small business tax concessions by increasing the small business entity turnover threshold for these concessions from $10 million to $50 million.

Some of the key concessions include:

Concession Commencement Date
Immediate deduction for certain start-up expenses and prepaid expenditure 1 July 2020
FBT exemption for:
• car parking benefits
• multiple work-related portable electronic devices
1 April 2021
Simplified trading stock rules 1 July 2021
Remit PAYG instalments based on GDP-adjusted notional tax 1 July 2021
Two-year amendment period 1 July 2021
Simplified accounting method determination for GST purposes 1 July 2021

The eligibility turnover thresholds for other small business tax concessions will remain at their current levels.

Employment Incentives

JobMaker hiring credit incentives
A JobMaker hiring credit will be available to eligible employers over 12 months from 7 October 2020 for each additional new job they create for an eligible employee aged 16-35.
Eligible employees must have received the JobSeeker payment, Youth allowance (Other), or Parenting payment for at least one of the previous three months at the time of hiring. Eligible employees are also required to work a minimum of 20 hours per week.

To be eligible, employers will need to demonstrate an increase in overall employee headcount and payroll for each new position created.

The credit will be paid quarterly in arrears at the following rates:
• $200 per week for those aged between 16-29, and
• $100 per week for those aged between 30-35.
Employers who are claiming the JobKeeper Payment will not be eligible for the hiring credit.

New apprenticeships and trainees
Businesses that employee a new apprentice or trainee will be eligible for a 50% wage subsidy between 5 October 2020 and 30 September 2021, up to a maximum of $7,000 per quarter.
The subsidy is capped at 100,000 workers and will be available to employers of any size or industry subject to meeting certain eligibility requirements.

Victoria’s Business Support Fund to be non-assessable
The Government confirmed it will make the Victorian Government’s business support fund for small and medium business as announced on 13 September 2020 non-assessable, non-exempt income for tax purposes. This includes payment of the third round of the Business Support Fund. State-based grants such as the Business Support Grants are usually considered taxable.

Additional R&D incentives
The Government announced that it will make enhancements to the proposed changes to the R & D tax incentive applying to income years starting on or after 1 July 2021.
For small R & D entities (turnover less than $20 million), the refundable R&D tax offset will increase and there will be no cap on annual cash refunds. The refundable R&D tax offset is proposed to be 18.5 percentage points above their tax rate.

For larger entities, the intensity tiers will be adjusted and the non-refundable R & D tax offset will be increased.

The marginal R&D premium will be the entity’s tax rate plus:
• a premium of 8.5 percentage points for R & D expenditure between 0%–2% R&D intensity; or
• a premium of 16.5 percentage points for R & D expenditure above 2% R&D intensity.
The cap on eligible R & D expenditure is also proposed to be lifted from $100 million to $150 million per annum.