You’ve probably heard the phrase “we’re living in unprecedented times” repeatedly this year. COVID-19 has plunged Australia into its first recession since the early 1990s and it’s the first time many Australian businesses have experienced this.
The Federal Government delayed the delivery of the budget until October this year so that they could better understand the business fallout from the COVID-19 lockdowns and restrictions. The budget that was announced was heavily geared towards utilising businesses to lead the economic recovery.
Several Federal Budget measures were announced to encourage this recovery, including:
- Major enhancements to the instant asset write-off scheme.
- Greater tax write-off provisions for business losses.
- Increased tax concessions for small to medium-sized businesses.
Here’s how each of these key tax measures could help your business.
Major Enhancements to The Instant Asset Write-Off Scheme
The instant asset write-off scheme allows eligible businesses to write off the purchase cost of new business assets as a tax deduction. The government announced in the budget that between now and the end of the 2021/2022 financial year:
- Businesses with an annual turnover of up to $5 billion are now eligible for the scheme (previously, the annual turnover limit was $50 million).
- There is no limit on the value of each asset that can be deducted (previously the individual asset value limit was $150,000).
The increase to the annual turnover threshold means that 99 per cent of Australian businesses will now be eligible for the instant asset write-off scheme. Business assets that can be written off include new and used business vehicles and equipment. The government is effectively subsidising your investment in new business assets by providing you with an immediate tax deduction for buying them.
Greater Business Loss Tax Write- Off Provisions
Many otherwise profitable businesses will make a loss due to the impact of the COVID-19 restrictions on the economy.
Some businesses will take longer to recover than others, some may never fully recover.
This unfortunate reality has been recognised via greater business loss tax write-off provisions being announced in the budget. If your business makes a loss between now and the end of 2021/22 financial year, you can offset that loss against any tax you paid on business profits in the 2018/2019, 2019/2020 or 2020/21 financial years.
Doing this will enable you to get a tax refund to boost your cash flow. However, it’s important to understand that you can’t generate a refund that’s higher than the tax you’ve paid in the eligible financial years.
Increased Tax Concessions For Small To Medium-Sized Businesses (Smes)
A range of tax concessions were announced for SMEs (businesses with an annual turnover up to $50 million) in the budget.
Before the budget, an SME was defined as a business with an annual turnover up to $10 million.
The Budget’s SME Tax Concessions Include:
- Introducing an immediate tax deduction for the capital expenses of start-up businesses.
- Allowing a fringe benefits tax (FBT) exemption for providing devices like laptops or phones to staff, as well as employee FBT car-parking exemptions from April 2021.
- Introducing simplified trading stock rules and GST accounting methods from July 2021.
Business Subsidies in the Federal Budget
In addition to the business tax measures, two subsidies announced in the Federal Budget could help you to employ additional staff to help you grow your business:
- The JobMaker Plan.
- The Boosting Apprenticeships Wage Subsidy.
The JobMaker Plan allows eligible businesses (those not on the JobKeeper program) to receive a subsidy for the next 12 months for employing eligible workers under the age of 35.
The Boosting Apprenticeships Wage Subsidy program will provide a 50 per cent wage subsidy for businesses who employ new apprentices up until September 30 2021.
To find out more about financing your next asset purchase to take advantage of the instant asset write-off scheme contact the team at Credit One on (07) 3340 6730 or visit www.creditone.com.au