I can see clearly now that Covid’s gone…(*unofficial) 2021 Federal Budget
… And just like that, another financial year is nearly behind us! For all of us, the last few months have been interesting to say the least, but it looks like some form of normality is returning along with a few new ‘normalities’ … cue the hand sanitiser bottles!
We have guided our clients through the past few months in times that have been worrying for many. The consequences of a worldwide pandemic is far reaching, but we remain committed to our clients, their families and all our business and personal connections through the next stay of economic re-building. Stay tuned for another blog on that once we have more details!
As has been the case for many years, the Federal Budget would have been released in May and the 2021 reforms well documented by now. Due to COVID-19 this has been delayed until 6 October 2020. So with a new financial year only days away, we thought it was time to look to the horizon and update you on the many changes that are ahead of us.
Axe the tax!
The federal government may not have axed income tax altogether, but they are chopping away at it. From 1 July 2020, the corporate tax rate for small and medium businesses will be reduced to 26%!
The tax reduction could not come at a better time with a lot of businesses struggling in what appears to be a long-term recovery. This is all part of the federal government’s plan to reduce the corporate tax rate to 25% from 1 July 2021).
The reduced tax rate applies to base rate entities, basically a fancy name for businesses with a turnover of less than $50 million where 80% or less of the entity’s turnover for the year is classified as base rate entity passive income.
There are ramifications here for the declaration or payment of franked dividends, but we won’t bore you with that chat. Get in contact if you want to know more!
$150k instant asset write off
The $150k instant asset write off (what a mouthful!) is scheduled to be reduced back to $1,000 from 1 July and will no longer be available for entities with aggregated turnover of $10m or more. With the budget not being presented until October 2020, there have been no further announcements for this plan to be extended.
If you’re looking at purchasing a new business asset, make sure its first used or installed ready to use by 30 June 2020.
With that being said, the accelerated depreciation initiative is still active until 30 June 2021.
Editors Note: Since the publication of this blog post, the Federal Treasurer has announced that the initiative will be extended until 31 December 2020.
Motor vehicle deduction increase
For those of you who claim motor vehicle deductions the cents per kilometre rate will increase from 68 cents per km to 72 cents per km from 1 July 2020.
Income tax offset
The $1,080 ‘low and middle income tax offset’ continues for individuals. This is a maximum of $1,080 per annum for income earners up to $90,000. It eventually reduces to zero on a pro rata basis up to $126,000.
Other expected changes
From 1 July 2020, if enacted, the following three changes are expected to provide further flexibility in the superannuation space for our older friends:
Allow individuals aged 65 and 66 years old to make voluntary superannuation contributions without satisfying the work test;
Increasing the age limit for making superannuation contributions to your spouse from 69 to 74;
Enabling individuals aged 65 and 66 years old to make up to three years of non-concessional superannuation contributions under the bring forward rule.
Shake tax, not hands – get in touch with m+h Private Tax Specialists today on +61 3036 7174 to see how we can help deliver the best support to you and your business.
As always, the above is general in nature, please discuss with your trusted advisor.