Here's what you need to know about tax cuts, JobMaker and the deficit.

Coronavirus has put a wrecking ball through the economy, and that means there's never been a more relevant budget for Australians. Making sense of the detail can be overwhelming, so here are some bite-sized bits of what's in the Budget, with a special thanks to member CROWLEY CALVERT AND HOLMES for breaking down this information. 

 

Changes to personal income tax rates:

The Government has announced that it will bring forward changes to the personal income tax rates that were due to apply from 1 July 2022, so that these changes now apply from 1 July 2020 (i.e., from the 2021 income year). These changes include:

  • 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.

 

JobMaker Hiring Credit:

The Government will introduce a JobMaker Hiring Credit to incentivise businesses to take on additional young job seekers.

From 7 October 2020, eligible employers will be able to claim $200 a week for each additionaleligible employee they hire aged 16 to 29 years old and $100 a week for each additional eligible employee aged 30 to 35 years old. 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 JobMaker Hiring Credit will be claimed quarterly in arrears by the employer from the ATO from 1 February 2021. Employers will need to report quarterly that they meet the eligibility criteria.

The amount of the credit is capped at $10,400 for each additional new position created. Furthermore, the total credit claimed by an employer cannot exceed the amount of the increase in payroll for the reporting period in question.

 

Uncapped immediate write-off for depreciable assets:

The Government has announced it will introduce the following changes to the Capital Allowance provisions:

  1. Businesses with an aggregated annual turnover of less than $5 billion will be able to claim an immediate deduction (what the Budget terms as 'full expensing') for the full (uncapped) cost of an eligible depreciable asset, in the year the asset is the first used or is installed ready for use, where the following requirements are satisfied:
    • The asset was acquired from 7.30pm AEDT on 6 October 2020 (i.e. Budget night).
    • 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, unless the taxpayer qualifies as a small or medium sized business (i.e., for these purposes, a business with an aggregated annual turnover of less than $50 million), in which case the asset can be second-hand.
  1. As is currently legislated, businesses with aggregated annual turnover between $50 million and $500 million can still deduct the cost of eligible second-hand assets costing less than $150,000 that are purchased from 2 April 2019 and first used or installed ready for use between 12 March 2020 and 31 December 2020 under the enhanced instant asset write-off.

    The Government has announced that it will extend the period in which such assets must first be used or installed ready for use by 6 months, until 30 June 20201.
  2. Small businesses (i.e., with aggregated annual turnover of less than $10 million) can deduct the balance of their simplified depreciation pool at the end of the income year while full expensing applies (i.e., up to 30 June 2022).

Furthermore, the provisions which prevent small businesses from re-entering the simplified depreciation regime for five years if they opt-out will continue to be suspended.

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