On Tuesday night Treasurer Josh Frydenberg announced the 2020 Australian Federal Budget which included tax cuts, wage subsidies and a big focus on rebuilding the economy and creating jobs.
There is new funding available to encourage employers to hire new apprentices and young people who are currently on job seeker as well as tax cuts for individuals, a new loss carry back regime and full value asset write off for 99% of businesses.
Funding available for new trainees and apprentices
The Federal government is delivering $1.2 billion in wage subsidies to support 100,000 new apprentices and trainees.
Tuesday night’s budget announcement revealed that a 50% wage subsidy will be paid to any employer hiring an apprentice regardless of location, industry, or business size.
Employers can claim up to $28,000 per year and is available for any apprentice starting after Monday October 6.
The subsidy will be available to claim until the 100,000 person quota is reached and will be paid directly to employers every quarter, ending on September 30 2021.
This comes on top of the $1.5 billion wage subsidy that was announced in July, which offered incentive to retain current apprentices and trainees by subsidizing 50% of their wage.
Tax savings for individuals
Millions of Australians are set to keep at least an extra $1000 this year after Tuesday night’s budget announcement revealed tax cuts are being implemented two years ahead of schedule.
Tax cuts which were planned for 1 July 2022 are being brought forward to 1 July 2020 to provide Australians with an immediate boost and stimulate the economy.
How much of a tax cut individuals get will depend on their annual income.
- If your annual income is $35,000 you will receive an extra $255 for the 20/21 financial year, and no extra for the following two years.
- If your annual income is $50,000 you will receive an extra $1,080 for 20/21, no extra in 21/22 and an extra $125 in 24/25.
- If your annual income is $80,000 you will receive an extra $1,080 in 20/21, no extra in 21/22 and an extra $875 in 24/25.
- If your annual income is $120,000 you will receive an extra $2,430 in 20/21, $2,250 in 21/22 and $4,125 in 24/25.
The Australian Taxation Office will potentially begin taking less tax from the end of October, once the budget passes parliament and they have adjusted their tax threshold schedule.
The personal income tax bracket threshold has also been increased, the 19% tax bracket being increased from $37,000 to $45,000 and the 32.5% tax bracket increasing from $90,000 to $120,000.
This means some individuals within these brackets will now pay a lower rate of personal income tax.
Full value asset tax write off for 99% of businesses
Businesses with a turnover of up to $5 billion are now able to claim the full cost of any eligible asset as a tax deduction in the first year it is used or installed.
This temporary tax incentive can be used for any eligible asset purchased after 7:30pm on October 6 2020 and will last until June 30 2022, reducing the amount of tax a business will need to pay.
Treasurer Josh Frydenberg revealed this during the federal budget announcement on Tuesday night,
“From tonight, over 99% of businesses will be able to write off the full value of any eligible asset they purchase for their business.”
Previously, only a portion of the asset was tax deductible in the first year and depreciated over future years.
Small and medium businesses will also be able to apply this full expensing to second hand assets and businesses earning $50-$500 million will be able to do so for assets of less than $50,000.
JobMaker Hiring Scheme to get young people in the workforce
A new hiring scheme aimed at encouraging businesses to hire young people has been unveiled at the Federal Budget announcement last night.
JobMaker is available for employers who have hired someone aged 16-35 who has received the JobSeeker payment, youth allowance or the parenting payment for at least one of the previous 3 months at time of hiring.
The payment will be available for 12 months from the time of hiring and employers will receive $200 per week for those under 30 and $100 per week for those between 30-35.
The new employees will need to work at least 20 hours per week and all businesses except for the big banks are eligible.
Employers must prove they have increased their overall number of employees to receive the payment and will need to report their employee’s payroll information to the Australian Taxation Office through single touch payroll.
The JobMaker Hiring Credit will support an estimated 450,000 people aged 16-35 gain employment and will cost $4 billion.
September changes to job keeper
The end of September saw JobKeeper payments lowered from $1500 per fortnight to $1200 per fortnight for full time employees working more than 20 hours per week and $750 per fortnight for part time employees working less than 20 hours per week.
To receive JobKeeper, employers will need to prove that their actual GST turnover has declined in the September 2020 quarter relative to a comparable period, such as the same quarter in 2019.
The JobKeeper payment has been split into two tiers based on how many hours the employee works.
Tier 1 of JobKeeper is for eligible employees who worked 80 or more hours in the four weeks of pay periods before either March 1 2020 or July 1 2020 and tier 1 recipients will receive the $1200 per fortnight amount.
Tier 2 of JobKeeper applies to any other eligible employee or business participant, who will receive the $750 per fortnight amount.
The payment has been extended to March 28 2020 but the amount will be cut further on January 4 2021.
The JobSeeker payment was also lowered at the end of September, so recipients will now receive an extra $250 per fortnight rather than $550 and will expire on December 31.
Loss carry back regime to offset losses
Tuesday night’s federal budget announced a loss carry back regime to help provide cash flow to businesses who have incurred a loss but would have been profitable if not for lockdown and COVID-19.
The regime will allow eligible companies to carry back tax losses made in the 2020-22 financial years to offset tax paid on profits in the 2018-19 financial year onward.
Businesses with a turnover of up to $5 billion will be eligible to offset their losses made in 2020-22 against prior profits made.
Similar loss carry back measures have been implemented in the United States, Britain, Germany, Austria, Japan and New Zealand and occur when a business experiencing a net operating loss chooses to apply that loss to a previous year’s tax return.
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