Treasury Laws Amendment (A Tax Plan for the COVID-19 Economic Recovery) Bill 2020 has now passed through Parliament without amendment.
The bill contained the following key tax measures that were announced in the Budget:
- Bringing forward the second stage of the Personal Income Tax Plan by two years to 2020-21.
- Allowing businesses to deduct the full cost of depreciating assets purchased and installed ready for use from 6 October 2020 until 30 June 2022.
- Introducing a temporary loss carry-back for companies for losses incurred from the 2020, 2021 and 2022 financial years back to the 2019 and later years.
- Increasing the small business entity (SBE) turnover threshold to $50 million for certain tax concessions.
- Refining the R&D Tax Incentive from 2021-22.
2021 Personal Tax Cuts
The ATO has now published the updated tax withholding schedules which will apply from 13 October 2020.
All employers will need to update their payroll to comply with the new tax rates by 16 November 2020. Payroll providers will be providing information on their software updates accordingly.
Employers do not need to make any tax adjustments for payrolls processed during the period 13 October to 16 November 2020 if the updated tax tables were not used.
Despite the tax cuts being backdated to 1 July this year, the ATO has confirmed that it will not be adjusting withholding schedules to account for any over-withheld amounts from the start of the financial year. The ATO has advised that ”any ‘over-withholding’ that occurred prior to the employer updating their payroll software and processes will be included in the tax assessment of the employee at the end of the income year.”
More information on the new tax rates can be found on the ATO’s website: ATO Tax Tables
Non-salary and wage earners who will not see the benefit of these tax cuts until they lodge their 2021 income tax returns have been encouraged to vary their September 2020 quarter PAYG Instalments to factor in the retrospective tax cuts.
Immediate Deduction for Depreciable Assets
From 6 October 2020 (7.30pm) until 30 June 2022, businesses with an annual turnover of up to $5 billion will be able to fully deduct the cost of any eligible depreciable assets purchased in the year they are installed ready for use. This includes the cost of improvements to existing eligible assets. For businesses with a turnover <$50 million, this also includes second-hand assets.
Under the existing instant asset write-off measure, businesses that have already acquired an asset (for a value under $150,000) will now have until 30 June 2021 to first use or install the asset to be eligible for the immediate deduction. This measure also allows businesses with turnover between $50 million and $500 million to deduct the cost of eligible second-hand assets costing less than $150,000 purchased by 31 December 2020.
Contact your Cooper Reeves Advisor for further information in relation to these new tax measures.