We have summarized the most relevant sections of the Federal Budget and compiled them into this article to assist you. Continue reading below to find out how the 20/21 Budget may impact you.
Changes to Personal Income Tax Rates The following increases have been proposed to the current tax rates:
*Please note that the above changes exclude the Medicare Levy
Changes to the Low Income Tax Offset (LITO)
From the 2021 income year, the Government will also bring forward the proposed LITO changes. The maximum LITO will be increased from $445 to $700, as outlined below:
Low & Middle Income Tax Offset (LAMITO)
For the 2021 income year, the current Low and Middle Income Tax Offset (LAMITO) will continue to apply. For eligible taxpayers, this is available in addition to the LITO.
JobMaker Hiring Credit
To create an incentive for businesses to hire young job seekers, the Government have included a quarterly JobMaker Hiring Credit in the budget for eligible employers.
The JobMaker Hiring Credit will be effective from 7 October 2020, where additional employees hired between the ages of 16 - 29 years old will attract a credit of $200 per week, and additional employees hired between the ages of 30 - 35 years old will attract a credit of $100 per week.
The total amount available for each new position is $10,400, whereby the credits for each employee cannot exceed this amount.
The credits are aimed towards new positions created between 7 October 2020 - 6 October 2021, where the credit will then be applied for up to 12 months after the position was established.
In regards to businesses obtaining the JobMaker credits, this will be achieved by the employer claiming quarterly arrears from 1 February 2021. In addition, quarterly reports will be required to ensure the employer meets the eligibility criteria.
Employer Eligibility for JobMaker
Has an ABN
Up to date with Tax Lodgment obligations
Registered for PAYG withholding
Reporting through Single Touch Payroll
Must be 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
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 credits. *For any new employers created after 30 September 2020, the JobMaker credits are not eligible to be claimed for the first employee hired. However, subsequent employees hired may be eligible.
Employee Eligibility for JobMaker
Must be aged (at the time their employment started) either; a) 16 - 29 years old, to attract the payment of $200 per week or; b) 30 - 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 7 October 2020 - 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
Be in their first year of employment with this employer and must be employed for the period that the employer is claiming for them
*Exclusions apply, including employees whom the employer is also receiving a wage subsidy under another Commonwealth program
Tax-Free Business Support Grants
Announced on 13 September 2020, the Victorian Government's Business Support Grants for small and medium sized businesses are non-assessable and non-exempt income for tax purposes.
Uncapped Immediate Write-Off for Depreciable Assets
The following changes will be introduced to the Capital Allowance provisions:
An immediate deduction for the full cost of an eligible depreciable asset will be available for businesses to claim. The business must have a collective annual turnover less than $5 billion, and the asset must meet the following requirements: a) The asset was acquired from 7:30pm AEDT on 6 October 2020 b) The asset was first used or installed ready for use by 30 June 2022 c) The asset is a new depreciable asset or is the cost of an improvement to an existing eligible asset, unless the taxpayer qualifies as a small or medium sized business (annual turnover less than $50 million) in which case the asset can be second-hand.
Small businesses (annual turnover less than $10 million) can deduct the balance of their simplified depreciation pool at the end of the income year while full expensing applies up to 30 June 2022.
Temporary Loss Carry Back for Eligible Companies Measures will be introduced to allow companies with a turnover of less than $5 billion to carry back losses from the 2020, 2021 or 2022 income years. The losses can then be used to to offset prior taxed profits made in or after the 2019 income year.
In the year of the loss, companies will then be able to generate a refundable tax offset. Tax refund limits will be set by the requirement that the amount carried back is not exceeding the earlier taxed profits and that the carry back does not establish a franking account deficit.
Removing Capital Gains Tax (CGT) for 'granny flat arrangements'
A bill has been proposed to exclude CGT from the creation, variation or termination of formal written granny flat arrangements, which outline the supply of accommodation for older Australians or people with disabilities. The targeted CGT exemption will apply from 1 July 2021 if it passes legislation.
In an effort to improve outcomes for superannuation fund members, the Government will provide $159.6 million towards implementing structural reforms. The funds will be contributed over a period of four years, beginning from the 2020/21 financial year.
Current structural flaws of concern include:
Unnecessary fees and insurance being paid on multiple accounts
Members paying too much in super fees
Underperforming products costing members
Inadequate transparency on how superfunds are spending members' money.
The four key structural reforms proposed to improve the current concerns include;
Your superannuation follows you - New superannuation accounts will no longer be automatically created each time a person changes their job, their existing super account will be fixed to the individual.
Empowering members - YourSuper, an interactive, online tool will be created to assist members with comparing suitable super products.
Holding funds to account for underperformance - An annual performance test will be introduced for any MySuper products to monitor underperformance. Funds that fail two consecutive underperformance tests will not be able to accept new members.
Increased accountability and transparency - Obligations will be strengthened on superannuation trustees to ensure their actions are consistent with members' retirement savings being increased.
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