5 Tax Reform Measures That Can Benefit You & Your Business

The highly anticipated COVID Tax reforms have recently passed in Federal Parliament, with no amendments. The Treasury Laws Amendment (A Tax Plan for the COVID-19 Economic Recovery) Bill 2020 aims to deliver lower taxes for businesses and individuals, in order to stimulate demand, support investment, boost economic growth and create jobs.

Five tax measures introduced with the Bill include:

1. Backdated income tax cuts for individuals

The Personal Income Tax Plan will be brought forward by two years to this financial year, meaning personal income tax cuts will be backdated to 1 July 2020. Part of this includes increasing the top threshold of the 19% income tax bracket from $37,000 to $45,000, and of the 32.5% top threshold from $90,000 to $120,000.

2. Immediate asset write-off

Businesses with an aggregate turnover of up to $5 billion will be able to immediately deduct the full cost of eligible depreciable assets of any value from the first year of purchase and potentially claim the full expense of improvements made to existing depreciable assets. Better still, small and medium sized businesses with an annual revenue of up to $50 million fully expense second hand assets, while businesses with an annual revenue of between $50 and $500 million can make a full deduction for second hand assets with a value of up to $150,000 if they are purchased before 1 January 2021.

3. Loss carry-back

Many sound businesses have found themselves in a loss-making position solely due to the effects of COVID. Companies with an annual turnover of up to $5 billion can apply their losses from the 2019 to 2022 income years against profits taxed in the previous years back to the 2018-2019 income year. This is a temporary measure which will be available until 2021-2022. The business must have lodged an income tax return for this financial year, as well as the past five financial years from this year, unless the business didn’t exist in that year. The carry-back will not generate a franking account deficit, and it will be limited to the value of the earlier taxed profits.

4. Research and Development investment incentive

The government will be investing $2 billion into businesses who invest in research and development, noting that R&D is central to the development of new products, processes and services which will assist in creating more national and international competition within the Australian market. This will take the form of limited or no cap on the amount of refundable R&D tax offset a company can claim, depending on their annual turnover.

5. Small business concessions

Businesses with an aggregated annual turnover of between $10 million and $50 million will have access to 10 small business tax concessions, which include:

• Immediate deduction for certain start up expenses
• Immediate deduction for certain prepaid expenditure
• Fringe benefits Tax (FBT) small business car parking exemption
• FBT multiple work related portable electronic devices exemption
• Simplified trading stock rules
• Pay as you go (PAYG) instalments based on GDP adjusted notional tax
• Small business excise concession
• Small business excise equivalent customs duty concession
• Two-year amendment period
• Simplified accounting methods.

If you need any assistance or guidance when it comes to all things tax, get in touch with the S&S Accounting & Business Services team today!