24 May 2020/21 Federal Budget Highlights
The Australian Government is putting plans in place for a pathway to economic recovery from the COVID-19 pandemic
After experiencing the worst global economic crisis since the Great Depression, the Australian Government is putting plans in place for a pathway to economic recovery from the COVID-19 pandemic. With the 2020/21 Federal Budget recently being announced, there have been many changes for both individuals and businesses to take note of.
Accelerating Personal Income Tax Cuts
Changes to personal income tax rates will be brought forward to rates that were due to apply from 1 July 2022, so that these changes now apply from 1 July 2020 (2020/21 financial year).
These changes involve:
- increasing the upper threshold of the 19% personal income tax bracket from $37,000 to $45,000; and
- increasing the upper threshold of the 32.5% personal income tax bracket from $90,000 to $120,000.
| Rate | Current (2019 to 2022) | Proposed (2021 – 2024) |
| 0% | 0 – $18,200 | 0 – $18,200 |
| 19% | $18,201 – $37,000 | $18,201 – $45,000 |
| 32.5% | $37,001 – $90,000 | $45,001 – $120,000 |
| 37% | $90,001 – $180,000 | $120,001 – $180,000 |
| 45% | $180,001+ | $180,001+ |
Jobmaker Hiring Credit – Employers and Young Workers
The Government will introduce a JobMaker Hiring Credit to incentivise businesses to take on additional young job seekers, which will be available to employers from 7 October 2020 for each new job they create over the next 12 months for which they hire an eligible young person.
For each eligible employee, employers will receive for up to 12 months:
• $200 a week if they hire an eligible young person aged 16 to 29 years; or
• $100 a week if they hire an eligible young person aged 30 to 35 years.
New jobs created until 6 October 2021 will attract the credit for up to 12 months from the date the new position is created. The Credit will be claimed quarterly in arrears by the employer from the ATO from 1 February 2021 and employers will need to report quarterly that they meet the eligibility criteria.
Who is an eligible employee?
Employees may be employed on a permanent, casual or fixed term basis.
To be an ‘eligible employee’, the employee must:
• be aged (i.e., at the time their employment started) either:
– 16 to 29 years old, to attract the payment of $200 per week; or
– 30 to 35 years old to attract the payment of $100 per week;
• have worked at least 20 paid hours per week on average for the full weeks they were employed over the reporting period;
• have commenced their employment during the period from 7 October 2020 to 6 October 2021;
• have received the JobSeeker Payment, Youth Allowance (Other), or Parenting Payment for at least one month within the past three months before they were hired; and
• be in their first year of employment with this employer and must be employed for the period that the employer is claiming for them.
Certain exclusions apply, including employees for whom the employer is also receiving a wage subsidy under another Commonwealth program.
Who is an eligible employer?
An employer is able to access the JobMaker Hiring Credit if the employer:
• has an ABN;
• is up to date with tax lodgement obligations;
• is registered for Pay As You Go withholding;
• is reporting through Single Touch Payroll;
• is claiming in respect of an ‘eligible employee’;
• has kept adequate records of the paid hours worked by the employee they are claiming the hiring credit in respect of; and
• is able to demonstrate that the credit is claimed in respect of an additional job that has been created.
Broadly, there must be an increase in the business’ total employee headcount and also in the payroll of the business for the reporting period (based on a comparison over a specified reference period).
Employers do not need to satisfy a fall in turnover test to access the JobMaker Hiring Credit.
Certain employers are excluded, including those who are claiming the JobKeeper payment.
New employers created after 30 September 2020 are not eligible for the first employee hired but are (potentially) eligible for the second and subsequent eligible hires.
Apprenticeships and Training
In addition to the Supporting Apprentices and Trainees Wage Subsidy that supports existing apprentices and trainees through to 31 March 2021, the government is continuing to help businesses by providing a 50 per cent wage subsidy, up to a cap of $7,000 per quarter, for commencing apprentices and trainees, including those employed by Group Training Organisations, until 30 September 2021. $252 million will be spent over two years to support the delivery of 50,000 higher education short courses in areas including teaching, health, information technology, science and agriculture.
Expansion of the Instant Asset Write Off
Changes to the Capital Allowance provisions will mean that businesses with an aggregated annual turnover of less than $5 billion will be able to claim an immediate deduction for the full (uncapped) cost of an eligible depreciable asset, in the year the asset is first used or is installed ready for use, where the following requirements are satisfied:
- The asset was acquired from budget announcement (7:30pm AEDT on 6 October 2020)
- The asset was first used or installed ready for use by 30 June 2022
- The asset is a new depreciable asset or is the cost of an improvement to an existing eligible asset
Small businesses (less than $10 million turnover) can deduct the balance of their simplified depreciation pool at the end of the income year while full expensing applies.
Temporary Loss Carry Back for Companies
These changes will allow companies with a turnover of less than $5 billion to carry back losses from the 2020, 2021 or 2022 income years to offset previously taxed profits made in or after the 2019 income year. The aim is to allow such companies to generate a refundable tax offset in the year in which the loss is made. The tax refund is limited by requiring that the amount carried back is not more than the earlier taxed profits and that the carry back does not generate a franking account deficit.
Superannuation Fund Changes
The Government will provide $159.6 million over four years from 2020/21 to implement reforms to improve outcomes for superannuation fund members, including measures to empower members, hold funds to account for underperformance and increase accountability and transparency to ensure retirement savings are being maximised.
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