On 9 October 2020, the Australian Prime Minister issued a release announcing the approval of the measures of the Budget 2020-21 to support taxpayers. Just delivered on 6 October, the Budget measures were included as part of the Treasury Laws Amendment (A Tax Plan for the COVID-19 Economic Recovery) Bill 2020, which was approved by the House of Representatives on 8 October and by the Senate on 9 October.
The measures approved are summarized as follows:
- Individual income tax cuts backdated to 1 July 2020, which include:
- an increase in the low income tax offset from AUD 445 to AUD 700;
- an increase in the top threshold of the 19% tax bracket from AUD 37,000 to AUD 45,000;
- an increase in the top threshold of the 32.5% tax bracket from AUD 90,000 to AUD120,000; and
- a one-off additional benefit of up to AUD 1,080 from the low and middle income tax offset (LMITO) in 2020-21;
- Further support for businesses, including:
- the expansion of the instant asset write-off, allowing businesses with turnover up to AUD 5 billion to deduct the full cost of eligible depreciable assets of any value in the year they are installed, with effect from 7:30 pm (AEDT) on 6 October 2020 until 30 June 2022; and
- loss relief, allowing businesses with turnover up to AUD 5 billion to carry back losses incurred in 2019–20, 2020–21, and/or 2021–22 against profits made in or after 2018-19, with the option of electing to receive a tax refund when lodging the 2020-21 and 2021-22 tax returns;
- Further support through the Research and Development Tax Incentive beginning 1 July 2021, including:
- for small claimants (turnover less than AUD 20 million), an increase in the refundable R&D tax offset to 18.5 percentage points above the claimant's company tax rate, with no AUD 4 million cap on annual cash refunds;
- for larger claimants, the intensity test will be streamlined from three to two tiers and the non-refundable R&D tax offset rates will be increased to 8.5 percentage points above the claimant's company tax rate for initial R&D expenditure up to 2% R&D intensity, and 16.5 percentage points above the claimant's company tax rate for R&D expenditure above 2% R&D intensity; and
- an increase in the cap on eligible R&D expenditure for all claimants from AUD 100 million to AUD 150 million per annum.
- Expanded access to small business tax concessions by lifting the aggregated annual turnover threshold for these concessions from AUD 10 million to AUD 50 million, which is applied in three phases:
- from 1 July 2020:
- immediate deductions for eligible start-up expenses; and
- immediate deductions for eligible prepaid expenditure;
- from 1 April 2021:
- exemption from the 47% fringe benefits tax on car parking provided to employees; and
- exemption from the 47% fringe benefits tax on multiple work-related portable electronic devices (e.g. phones or laptops) provided to employees;
- from 1 July 2021:
- simplified trading stock rules;
- remit pay as you go instalments based on GDP adjusted notional tax;
- settle excise duty monthly on eligible goods;
- settle excise-equivalent customs duty monthly on eligible goods;
- two-year amendment period for income tax assessments for income years starting from this date; and
- the Commissioner of Taxation will have the power to create a simplified accounting method determination for GST purposes for these businesses.
- from 1 July 2020:
Note, certain other measures announced as part of the Budget are not included in the Treasury Laws Amendment (A Tax Plan for the COVID-19 Economic Recovery) Bill 2020. This includes the revision of the corporate residency test and the revision of the list of jurisdictions that have effective information exchange with Australia for the purposes of the reduced withholding tax rate of 15% on distributions made by a managed investment trust. Further details on the implementation of these measures will be published once available.