Budget 2020: How your business can benefit

Posted: 8 October 2020 11:16 am

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The Federal Budget includes a number of new schemes that could help your business including tax offsets, asset write-offs and wage subsidies for new hires.

As well as revealing income tax cuts for workers and changes to superannuation, in the Federal Budget 2020 the government also announced a range of initiatives for Australian businesses. These largely are designed to help boost cash flow and motivate them to invest in assets and new employees, and come in the form of tax incentives and wage subsidies.

Claim full tax deductions on assets

The government will allow Australian businesses to claim the full cost of eligible depreciable assets (those which lose their value over time) of any value between now and 30 June 2022. You can claim the full deduction in the first year the item is used or installed, either this financial year or the 2021-22 financial year.

This could be a great incentive if your business is considering buying some expensive equipment, software, furniture or other eligible asset. This scheme also allows you to claim a deduction for the cost of upgrading, servicing or improving existing eligible depreciable assets if you incur the cost prior to 20 June 2022.

This measure is an extension of the current instant asset write-off scheme. The scheme was previously only available to smaller businesses, however, it's now available to all businesses with a turnover of less than $5 billion. The government says this is all but the top 1% of businesses in the country.

Small and medium-sized businesses will also be able to deduct the full expense on second-hand assets (it was previously reserved for new assets). This benefit is also available to larger businesses with an annual turnover between $50 million and $500 million, however only for second-hand assets that cost less than $150,000.

This is estimated to save Australian businesses $26.7 billion in the form of tax relief. While also saving businesses money, the government hopes this will inspire businesses to invest and spend over the next two years, helping boost the sluggish economy in the process.

Offset losses with previous profits

The government also announced businesses will be able to carry-back their losses to offset tax paid on profits in previous financial years. This allows businesses that were profitable in the past but which are making a loss now to offset this loss and receive a tax refund, to help boost cash flow and invest.

This scheme is again available to businesses with annual turnover under $5 billion. You can carry back any losses made in the 2019-20, 2020-21 or 2021-22 financial year to offset the tax paid on profits in the 2018-19 financial year (or profits made after this). Companies can claim this offset in either their 2020-21 or 2021-22 tax return.

Wage subsidies for new hires

If your business is thinking about hiring some new employees, there is now a financial benefit to do so.

Business can apply for a wage subsidy for hiring a young person under the age of 35 who is currently receiving welfare payments such as JobSeeker. It's a wage subsidy of $200 per week for hiring a worker aged 16 to 29, or $100 per week for workers aged 30-35. Any business with a turnover of less than $5 billion is eligible to apply for this wage subsidy.

Check out the full Budget 2020 wrap up to see what else the government announced and how it could impact your finances.

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