The Treasurer handed down the Federal Budget 2020-21 on 6 October 2020. Detailed below is an overview of the significant tax measures announced, followed by further information regarding each of these measures.

Summary of tax measures

Personal Income Tax Measures

The following tax cuts will take effect from 1 July 2020:

• the top threshold of the 19% personal income tax bracket will increase from $37,000 to $45,000.
• the low-income tax offset (LITO) will increase from $445 to $700.
• the top threshold of the 32.5% personal income tax bracket will increase from $90,000 to $120,000.

The Government will also provide a one-off additional benefit from the low to middle-income tax offset in 2020-21.

Business Tax Incentives

• Temporary full expensing – From 7:30 pm (AEDT) on 6 October 2020 until 30 June 2022, businesses with an aggregated annual turnover of up to $5 billion will be able to deduct the full cost of eligible depreciable assets of any value in the year they are first used or installed ready for use. The cost of improvements made during this period to existing eligible depreciable assets can also be fully deducted.
• Temporary loss carry-back to support cash flow – The Government will allow companies with an aggregated turnover of less than $5 billion to offset tax losses against previous profits on which tax has been paid, to generate a refund. Eligible companies can carry back tax losses from the 2019-20, 2020-21 and/or 2021-22 income years to offset previously taxed profits in 2018-19 or later income years.
• Increase the small business entity turnover threshold – The Government will expand access to a range of small business tax concessions for small to medium businesses by lifting the aggregated annual turnover threshold from $10 million to $50 million.
• JobMaker Hiring Credit – The Government will provide financial support to employers to take on additional employees through a hiring credit. Eligible employers who can demonstrate that the new employee will increase overall employee headcount and payroll will receive $200 per week if they hire an eligible employee aged 16 to 29 years, or $100 per week if they hire an eligible employee aged 30 to 35 years.
• Fringe benefits tax – The Government will introduce an exemption for employer-provided retraining and reskilling benefits provided to redundant, or soon to be redundant employees, where the benefits may not be related to their current employment.
• Research and Development Tax Incentive – The Government will enhance previously announced reforms to support business investment in Australia.

Further Budget Measures

• Superannuation Reform – The Government has announced several reforms to the compulsory superannuation system which will reduce the number of duplicate accounts held by employees as a result of changes in employment. The reforms will also hold funds to account for underperformance and will improve the transparency and accountability of trustees of superannuation funds.
• Tax residency of foreign companies – The Government will amend the law to provide that a company that is incorporated offshore will be treated as an Australian tax resident if it has a ‘significant economic connection to Australia.’
• Victorian Government business support grants – the Government will legislate to ensure these grants, as announced on 13 September 2020, are non-assessable, non-exempt income for tax purposes.
• The Government will provide a targeted capital gains tax (CGT) exemption for granny flat arrangements where there is a formal written agreement.