Updated: Jun 19, 2021
There are big tax cuts for individuals and a number of significant boosts for businesses, all designed to increase spending and boost jobs coming out of Tuesday night's Federal Budget.
With an Australia suffering by the effects of COVID-19, the Treasurer, Josh Frydenberg unveiled a big spending Federal Budget designed to get the Australian economy moving.
The key Area for individuals is:
* There’s a big tax cut coming *
The Treasurer is bringing forward tax cuts originally intended to be introduced from 1 July 2022 and applying them from 1 July 2020 instead.
Those with a taxable income between $45,000 and $90,000 will be $1,080 better off this year, with the size of the tax cut then increasing to a maximum of $2,430 this year for those with a taxable income of $120,000 or more.
The tax cut will be passed on when Parliament passes the necessary legislation which could happen as soon as this week.
The ATO will then be able to implement the cut immediately by updating their PAYG withholding schedules so that employers can deduct the new, lower amounts of tax that apply to income. We can expect this to be done towards the later part of 2020.
Tax rates for residents for the 2020/21 year (as well as 2021/22, 2022/23 and 2023/24) now look like this:
Taxable income Rate (%) Tax on this income
$0 – $18,200 0 Nil
$18,201 – $45,000 19 19c for each $1 over $18,200
$45,001 – $120,000 32.5 $5,092 plus 32.5c for each $1 over $45,000
$120,001 – $180,000 37 $29,467 plus 37c for each $1 over $120,000
$180,001 + 45 $51,667 plus 45c for each $1 over $180,000
For small businesses, there are two significant tax breaks included in the Budget:
There is a dramatic extension of the instant asset write-off deduction (now called “full expensing”) for capital assets acquired by small businesses.
From 7:30pm (AEDT) on 6 October 2020 until 30 June 2022, businesses with a turnover up to $5 billion will be able to deduct the full cost of eligible capital assets of any value in the year they are installed.
The cost of improvements to existing eligible depreciable assets made during this period can also be fully deducted.
Previously, assets up to $150,000 could be deducted. In a nutshell, this means that businesses can now immediately deduct the full cost of all purchases of items such as:
o Plant and machinery
o Fixtures and fittings
o Technology, such as laptops and computers
o Motor vehicles such as utes, vans and most cars
The Government will also allow companies with turnover up to $5 billion to offset losses against previous profits on which tax has been paid, to generate a refund. Losses incurred up to 2021‑22 can be carried back against profits made in or after 2018‑19.
With many companies and expecting to make losses this year due to COVID-19, these companies may elect to receive a tax refund from the ATO for the tax they paid in earlier years back to 2018-19 when they lodge their 2020‑21 and 2021‑22 tax returns.