Part 3 – Budget reminders. Under the Hood.

The 2020 Federal Budget was one of the most far reaching and complex ever brought in.  This is the first of three articles to remind us of important topics the budget addressed. 

Temporary full expensing of eligible capital assets

Most businesses are now able to claim full deductions for depreciation assets.

Businesses with aggregated annual turnover of less than $5 billion will be able to deduct the full cost of eligible capital assets in the year they are first used.

Full expensing in the year of first use will apply to:-

• new depreciating assets;
• the cost of improvements to existing eligible assets;
• for small and medium businesses (aggregated turnover of less than $50 million – second-hand assets

Applies to eligible capital assets acquired from 7.30pm AEDT on 6 October 2020 and first used or installed by 30 June 2022

Temporary loss carry-back for companies

Eligible companies can elect to carry back tax losses from the 2019-20, 2020-21 or 2021-22 income years to offset previously taxed profits in 2018-19 or later income years.

The effect of the election will be to generate a refundable tax offset and it will first be available when lodging the 2020-21 tax return, subject to the amount carried back not being more than the earlier taxed profits and not generating a franking account deficit.

The new loss carry-back measure is designed to promote economic recovery by providing cash flow support to previously profitable companies that COVID-19 has turned into loss making businesses – many such businesses might find it difficult to survive or re-employ staff if they had to wait years to get tax relief for the losses under the present system.

As with a similar scheme operated in 2012-13, the carry back is notional – it is not necessary to amend the prior year return – the benefit is received in the assessment for the year in which the election is made.

The tax refund will be available on election by eligible businesses when they lodge their 2020-21 and 2021-22 tax returns.

JobMaker Plan Boosting Apprenticeships Wage Subsidy

From 5 October 2020 to 30 September 2021, businesses of any size can claim the wage subsidy for a new, or recommencing, apprentices or trainees.

Eligible businesses will be reimbursed 50% of an apprentice or trainee’s wages, up to $7,000 per quarter, capped to 100,000 places.

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