The treasurer certainly splashed the cash in the 2020 federal budget on Tuesday night.

This budget is essentially a plan A, B, and C. They have thrown everything “but the kitchen sink” at kickstarting the economy.

It is all predicated on the assumption that the tax cuts and incentives will be spent, and not saved. If you were uncertain about the future of your employment and the economy, it is highly likely that you would save it until confidence is returned. This is not what the Government would want to hear.

This brings it back to the business sector. It will take leadership, and a fair cup of courage, from business owners to begin investing in themselves and their businesses. If this happens, we will see a flow-on effect.

Is COVID still a thing? Absolutely! While people want to believe that as the clock strikes midnight on December 31, COVID will be left in 2020 (we wish!), unless Australia changes their strategy towards COVID, which by the way is not going to happen, or a viable vaccine is found, I shudder to think what 2021 looks like for Australians and the economy.

We’ve taken the time to curate the key issues from this budget that we thought would interest you, for your future.

Personal income tax

As widely anticipated, the announcement included bringing forward personal income tax cuts already legislated. This involves increasing the low-income tax offset (LITO) from $445 to $700; increasing the top threshold of the 19 percent bracket from $37,000 to $45,000, and increasing the top threshold of the 32.5 percent bracket from $90,000 to $120,000.  In addition, the Government announced a one-off additional benefit from the low- and middle-income tax offset.

The Government noted that these changes deliver tax relief to low- and middle-income earners for the 2020-21 income year of up to $2,745 for individuals and up to $5,490 for dual-income families, compared with 2017-18 rates and thresholds.

• The top threshold of the 19 percent personal income tax bracket will increase from $37,000 to $45,000.
• The low-income tax offset (LITO) will increase from $445 to $700. The increased LITO will reduce at a rate of 5 cents per dollar between taxable incomes of $37,500 and $45,000. The LITO will then reduce at a rate of 1.5 cents per dollar between taxable incomes of $45,000 and $66,667.
• The top threshold of the 32.5 percent personal income tax bracket will increase from $90,000 to $120,000.

The Government will retain the low and middle income (LAMITO) in 2020-21. LAMITO provides a reduction in tax of up to $1,080.

Exempting granny flat arrangements from capital gains tax

The Government will provide a targeted capital gains tax (CGT) exemption for granny flat arrangements where there is a formal written agreement. The exemption will apply to arrangements with older Australians or those with a disability. The measure will have effect from the first income year after the date of Royal Assent of the enabling legislation.

CGT consequences are currently an impediment to the creation of formal and legally enforceable granny flat arrangements. When faced with a potentially significant CGT liability, families often opt for informal arrangements, which can lead to financial abuse and exploitation in the event that the family relationship breaks down. This measure will remove the CGT impediments, reducing the risk of abuse to vulnerable Australians.

Business owners

The Government will allow eligible companies to 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.

A Research and Development Tax Incentive has been announced to support business Research and Development (R&D) investment in Australia and help businesses manage the economic impacts of the COVID-19 pandemic.

The Government will support small businesses (with an aggregated annual turnover of less than $10 million) the ability to deduct the balance of their simplified depreciation pool at the end of the income year while full expensing applies.

Corporate tax entities with an aggregated turnover of less than $5 billion can apply tax losses against taxed profits in a previous year, generating a refundable tax offset in the year in which the loss is made. The tax refund would be limited by requiring that the amount carried back is not more than the earlier taxed profits and that the carryback does not generate a franking account deficit. The tax refund will be available on the election by eligible businesses when they lodge their 2020-21 and 2021-22 tax returns.

Currently, companies are required to carry losses forward to offset profits in future years. Companies that do not elect to carry back losses under this measure can still carry losses forward as normal.

The Government will make the Victorian Government’s business support grants for small and medium businesses as announced on 13 September 2020 non-assessable, non-exempt (NANE) income for tax purposes.

State-based grants such as the Business Support Grants are generally considered taxable income by the Commonwealth. Given COVID-19 and the exceptional circumstances, Victorian businesses face, providing this additional concessional treatment will assist in their recovery.

Eligibility for this treatment will be limited to grants announced on or after 13 September 2020 and for payments made between 13 September 2020 and 30 June 2021.

Boosting apprenticeships wage subsidy

The Government will provide $1.2 billion over four years from 2020-21 to increase the number of apprentices and trainees employed and build a pipeline of skilled workers to support Australia’s economic recovery.

From 5 October 2020 to 30 September 2021, businesses of any size can claim the new Boosting Apprentices Wage Subsidy for new apprentices or trainees who commence during this period. Eligible businesses will be reimbursed up to 50 percent of an apprentice or trainee’s wages worth up to $7,000 per quarter, capped at 100,000 places.

JobMaker Hiring Credit

The Government will provide $4.0 billion over three years from 2020-21 to accelerate employment growth by supporting organisations to take on additional employees through a hiring credit. The 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.

Eligible employers who can demonstrate that the new employee will increase overall employee headcount and payroll will receive $200 per week if they hire an eligible employee aged 16 to 29 years or $100 per week if they hire an eligible employee aged 30 to 35 years. The JobMaker Hiring Credit will be available for up to 12 months from the date of employment of the eligible employee with a maximum amount of $10,400 per additional new position created.

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

Superannuation

Superannuation was not a big focus for this budget, but additional funding has been announced to address serious and organised crime in the tax and superannuation system.

The Government will also provide $159.6 million over four years from 2020-21 to implement reforms to superannuation to improve outcomes for superannuation fund members. The reforms, which will reduce the number of duplicate accounts held by employees as a result of changes in employment and prevent new members from joining underperforming funds via a portal that will be developed called YourSuper.

Aged care

The Government will provide $2.0 billion over four years from 2020-21 to further support older Australians accessing aged care by providing additional home care packages as well as continuing to improve transparency and regulatory standards.

The Government will provide additional funding to support older Australians throughout the COVID-19 pandemic ($700.2 million including income tax revenue impacts).