Institute of Certified Bookkeepers

For a general summary of the budget refer to mybusiness.com.au.

Status

Most of the tax driven parts of the budget are now law.

Parts were announced pre-budget.

Parts are under consultation

Programs that impact Business and what it means for Bookkeepers

Tax

Small Business definition increases for businesses with up to $50 million (previously $10m). This brings access to the small business tax concessions to an additional 20k businesses.

The major reform of impact is the reduction of lower personal income tax rates.

Tax for Individuals

Government announces the 2020–21 tax relief for individuals will be up to $2,745 with the most impacted being on income below $90k.

Business Explanation

Individual tax rates will be reduced, with a backdated start date of 1st July 2020.

The ATO explains it here on their JobMaker Plan web page.

Individuals may also be eligible for a one-off income tax offset for this tax year.

The ATO will release new tax tables outlining how much tax is to be withheld from each pay as soon as the announcements become law.

Before the BudgetChanged by the Budget
Resident tax rates for 2020–21
Taxable incomeTax on this income
0 – $18,200 Nil
$18,201 – $37,000 19c for each $1 over $18,200
$37,001 – $90,000 $3,572 plus 32.5c for each $1 over $37,000
$90,001 – $180,000 $20,797 plus 37c for each $1 over $90,000
$180,001 and over $54,097 plus 45c for each $1 over $180,000
The above rates do not include the Medicare levy of 2%
Resident tax rates for 2020–21
Taxable incomeTax on this income
0 – $18,200 Nil
$18,201 – $45,000 19c for each $1 over $18,200
$45,001 – $120,000 $5,092 plus 32.5c for each $1 over $45,000
$120,001 – $180,000 $29,467 plus 37c for each $1 over $120,000
$180,001 and over $51,667 plus 45c for each $1 over $180,000
Low Income Tax Offset: $445 Low Income Tax Offset: $700

The Treasury Budget 2020–2021 Fact Sheet provides further explanation of the announcement.

Bookkeeping Impact

The changes will mean that for individuals the future tax withheld will simply be reduced to the new rates as if they had applied all year, and individuals will also receive a refund following lodgment of the tax return as we are already 3 months into the current tax year.

JobMaker

Business Explanation

Titled “JobMaker hiring credit”

If a business hires employees that:

  • are a new employee (increase in headcount and increase in payroll)
  • are additional employees (i.e. you can’t terminate one and replace them with another)
  • were previously on JobSeeker, Youth Allowance (Other) or Parenting Payment for 1 month within the last 3 months
  • are aged between 16 and 35, and
  • work at least 20 hours per week for “the full weeks they were employed”, and
  • it seems they must be employed for the full period of the quarter

If the employer:

  • has an ABN
  • is up to date with tax lodgment obligations
  • registered for PAYG Withholding and reporting through STP
  • registered for this system before 7th October 2021
  • is not on JobKeeper
    (Important – if you are receiving JobKeeper then you cannot receive this support)

They will receive a “credit” of $200 per week for those aged up to 30, and $100 per week for those aged up to 35.

For the first 12 months of the new employment.

Think JobKeeper and systems for eligibility and claiming the subsidy quarterly in arrears. There is no Decline in Turnover test.

The program runs until June 2023, but for each new employee the subsidy can only be received for 12 months – i.e. 52 weeks of $200 per week.

For a new business the first employee cannot receive the subsidy, but the second and further employees can.

The Treasury JobMaker Fact Sheet provides further detail on the announcement.

But wait for the further detail – there are many concepts here that need the Rules to explain how this will work.

Currently before a Senate Committee - it appears this system will not be available until 1 Junary 2021

Bookkeeping Impact

It appears that the Payroll STP/JobKeeper system will be used to implement this program.

We foresee that an employee will use a new JobKeeper type code to identify eligible JobMaker employees and report through STP. We hope then the credit is automatically posted to the clients integrated client account, without the need for a quarterly form.

Details to follow.

New Apprentices

Business Explanation

The first 100,000 new apprentices or trainees engaged by business after 5th October and before 30th September 2021 will be eligible for 50% of their wages subsidised.

Capped at $7,000 per quarter.

Paid until 30th September 2021.

All industries and all locations.

This is in addition to the previous apprentice program. This subsidy is not available for an apprentice receiving other wage support.

Explained in full at Business.gov.au

Australian Government – Boosting Apprenticeship Commencements

Bookkeeping Impact

Same process as for the existing COVID apprentice scheme.
Treasury – Economic Response to the Coronavirus

Note it is limited to 100,000 persons.

Loss Carry-back for Business

Business Explanation

Only applies to Companies (approx. 50% of registered ABNs, approx. 1m entities)

Turnover up to $5 billion (i.e. just about every company)

If the company incurs a loss in the 2019–20 income year or 2020–21 or 2021–22 income year it can be offset against profits made in either of the earlier 2018–19 (or presumably the 2019–20 year). If they paid tax for those years and now incur losses the company can get a refund of the portion of tax.

If this only applies to the 2021 or 2022 year this will have two possible cash impacts:

  1. PAYG Instalments paid quarterly by the company as tax in advance for the 2020–21 tax could be reconsidered and varied down or to nil, therefore allowing the company to pay less cash to the ATO now (September 2020, December 2020 and March 2021 Quarters) and have those funds available for other purposes.
  2. Long-term, if the company is in a loss there is an incentive to lodge the 2020–21 tax return early and recoup 30% of the loss as a tax refund if the company paid tax in those earlier years.

Summary: If the company paid tax in the past and is now in a loss position it can reduce PAYGI instalments now and possibly reclaim some previously paid tax after June 2021.

Bookkeeping Impact

Seek confirmation from the Tax Agent or business about reducing the PAYG Instalment amounts on the Quarterly BAS.

When considering the cashflow needs of a business you may be able to alter the obligations to the ATO for both quarterly and the tax on their 2021 tax return.

The interpretation and application of this provision to a business’s circumstances is primarily an Income Tax consideration so it is out of scope for most bookkeepers.

Worksheet

Tax eventAmount paid
Total Income tax paid for 2018–19 tax year (includes any PAYGI instalments 9/18, 12/18, 3/19, 6/19 and balance on the tax return) $
Total Income tax paid / to be paid for 2019–20 tax year (includes any PAYGI instalments 9/19, 12/19, 3/20, 6/20 and balance on the tax return) $
Total Income Tax paid in 2019 & 2020 (“A”)$
Loss incurred in the year ended 30th June 2020 $
Loss incurred in the year ended 30th June 2021 $
Total Losses (“B”)$
Total amount of potential tax credit (“C” = B × 30%) $
Total amount of potential tax refund (lesser of A or C) $

Instant Asset Write-off Expanded

Business Explanation

All businesses with turnover of less than $5 billion.

Instant tax deduction for the full cost of eligible depreciable assets of any value in the year they are installed and ready for use.

Instant tax deduction for improvement to existing eligible depreciable assets.

As from 7.30pm on 6th October until 30th June 2022.

Prior to 6th October for businesses with turnover of less than $500 million the cost limit was $150,000 for assets acquired from 12th March 2020 until now. Prior to that it was a $30,000 limit for businesses with turnover of less than $50 million.

The car limit (passenger vehicles) still applies $57k for the 2019–20 year and $59k for 2020–21.

The small businesses (turnover less than $10m) still have access to the small business pool write-off provisions of 30% depreciation or the balance of the pool if below $150k.

Bookkeeping Impact

Important Note: The Assets can still be booked as Assets to the Plant and Equipment account and depreciated for accounting purposes at a 20% or 30% or whatever is appropriate rate, even if for tax purposes it is being fully written off at the time of purchase and installation. This may be important for ensuring the value of assets is properly reflected on the balance sheet, say for the purposes of bank loan applications etc. or for showing the business is not insolvent. A tax incentive does not mean the Asset has to be written off in the accounts.

It is really a long-term cash incentive program.

Bookkeepers should ensure any assets acquired are booked to the Asset accounts on the balance sheet.

Consider the tax cash impact. If a business is acquiring Assets that will be written off for tax, then it will impact on the tax return and the amount of tax to pay. Consult with the tax agent to ensure any reduction in PAYG Instalments on the quarterly BAS and also consider for any cashflow planning. This aspect is similar to the loss carry back tax and cash impact.

Your Future, Your Super

Business Explanation

An existing superannuation fund of an employee will be “stapled” if they change jobs, preventing the creation of multiple funds.

From 1st July 2021 an employer must pay into the existing superfund of the employee unless the employee nominates a new account

An online Your Super comparison tool will assist choice of superfunds.

Bookkeeping Impact

An employer will have to pay super into the existing superfund of the employee and not create a new fund unless instructed by the employee. If the employee does not have a fund, then the default fund of the employer can be utilised.

“The employer will obtain the information about the existing superannuation fund from the ATO.”
We have requested that this functionality must be available to Agents and preferably through payroll software.

Support for Small Business Management

Business Explanation

Free, accessible and tailored support for small business owners. An external stress, anxiety, how to think and cope support program – BeyondBlue New Access program

Bookkeeping Impact

Small business advisers program – a course for advisers

Ensure the receipt of all Grants and COVID support are identified separately in the business P&L.

JobTrainer Fund

Business Explanation

Providing school leavers and job seekers access to additional free or low-cost courses to boost their skills. A $1b Fund 50/50 by agreement of the state and federal governments.

Details are yet to be released. Concept appears to be it will apply to those areas of skill shortages identified by the National Skills Commission. The best explanation we sourced from thesector.com.au.

R&D Incentive

Business Explanation

Business involved in eligible R&D activities, with a turnover of less than $20m, will be eligible for a refundable R&D tax offset at 18.5% above the claimant’s company tax rate.

Bookkeeping Impact

It is specific, it is complex, seek appropriate professional advice to ascertain the impact for relevant businesses.

Better Access to Borrowing

Business Explanation

Government call it “Consumer Credit Reforms”. Program is about reducing barriers to credit by changing regulations around the process lenders have to go through before lending to a consumer.

Initiatives include reducing the time and cost of credit assessments, reduce red tape, make it easier to switch lenders and enhance access to credit for small business.

Lenders will be permitted to rely on information provided by borrowers, unless there are reasonable grounds to suspect it is unreliable (hence the catch).

Change the risk averse nature of lenders away from “lender beware” to a principle of “borrower responsibility”.

Remove the “one-size-fits-all” approach for all lending applications.

Simplifying credit application processes.

Comment

The detail is required. A process of consultation to design the reform is required.

Insolvency Reform

Business Explanation

From 1st January 2021 a new process for small business.

Those with liabilities of less than $1m.

Reduce complexity, time and cost.

Enable restructure and to survive, where appropriate. It is not about walking away from debt. It is about maximising returns to those owed money in an appropriate manner.

A business may continue trading by the business owners while restructuring or negotiating appropriate repayment plans.

From 1st January to 31st March 2021 a notification to ASIC of intention to access this simplified restructuring process will continue to apply the temporary insolvency relief.

Comment

The detail is required. A process of consultation to design the reform is required and underway.

The Treasury Insolvency Reforms Fact Sheet provides more indication of the intended process.

Victoria: Business Support Grants

Business Explanation

Victorian business support grants for

Small and Medium businesses

For grants announced on or after 13th September 2020 and paid up until 30th June 2021 will be nonassessable and non-exempt for income tax purposes.

Bookkeeping Impact

Ensure the receipt of all Grants and COVID support are identified separately in the business P&L. Ensure that when the accountant is preparing the tax returns they are advised of what types of grants and subsidies have been received. Maybe identify those you know are non-assessable and highlight them for tax agent consideration.

Digital Developments

Business Explanation

Development of Digital technologies

Future changes to the ABN/ABR system to be brought into synch and unified with the ASIC registers (the Modernising Business Registers program).

Digital identity systems both myGov and myGovID are being developed.

Cyber security infrastructure and systems are being further developed.

NBN & 5G improvements to Australia’s internet

Consumer Data Rights to improve access and openness about consumer right to access data (listed as for the banking and energy sectors, but it is not the way it being implemented i.e. it has broad and wide ranging impacts to all business data)

e-invoicing has been supported and mandated for Government Agencies by 1stJuly 2022.

Review of the Payments system.

Government have increased their supported “advice” through the ASBAS program. ICB does not support this program.

Bookkeeping Impact

The momentum is growing for Business to embrace using the developed e-invoicing framework to send invoices as data and not PDF, to receive invoices as data and not a PDF to be deciphered. Noting the environment allows PDFs to be provided as well. Use cutting edge software to send and receive invoices efficiently. Ensure your software includes an invoice authorisation process to approve that an invoice is acceptable and should be scheduled for payment.

Ensure the receipt of all Grants and COVID support are identified separately in the business P&L.

Other

$7.5b on transport infrastructure projects.

$1.5b manufacturing initiatives.

10,000 first home buyer incentives.

2020 Cyber Security Strategy enhanced.

Cutting red tape initiatives – streamline and digitise regulatory processes.

Boosting exports through technology-based improvements to cut red tape on export processes.

Energy security and market reforms.

Commentary

Government background statistics

  • 60% of those who lost their jobs or were stood down are back at work, that leaves 540k who are not.
  • GDP forecast to fall by 3.75% in 2020 and then grow by 4.25% in 2021.
  • Unemployment expected to peak at 8% and then drop to 6.5% in June 2022.

We had hoped the JobMaker program would enable existing businesses to re-engage with employees who may have been stood down. We had hoped it would provide real incentive, encouragement and assistance to businesses to seek to re-establish or re-engineer their business through new employment. The conditions around this program seem restrictive.

We had hoped for direct assistance to truly small (i.e turnover below $10m) business to establish their new COVID or post-COVID normal operation. JobKeeper will provide this for some into the rest of the year, but there is no direct assistance for others. The budget is driven by a concept that business will recover through the expenditure of; government, or by those who can afford to invest (the asset write off), or with the theory that individuals will spend the extra amount in their pocket due to the reduction in taxes.

The Governments encouragement to all business that expenditure will happen therefore “keep your doors open” and “employ” seems to be the message.

Resources

  • Updated: 28th October 2020
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