Businesses with an aggregated turnover of less than $5 billion can deduct the full cost of new eligible depreciating assets that are first held, and first used or installed ready for use for a taxable purpose from 7:30 PM AEDT on 6th October 2020 to 30th June 2022. Small and medium sized businesses with aggregated turnover of less than $50 million, can also expense full cost of eligible second-hand assets.
Any cost of improvement to the existing depreciable assets made during this period is also allowed to be fully expensed.
This will results in decreasing the profit for the year when asset is purchased or cost of improvement is incurred and thereby reducing tax liabilities. In case of loss, it can be carried back and businesses can claim cash refunds.
Corporate entities with less than $5 Billion turnover in a relevant loss year can carry back losses made in the financial years 2019-20, 2020-21, and 2021-22.
This means that entities don’t have to wait to claim losses until it makes further profits. Such losses can be offset against the profits made in 2018-19 or later income years. This will help to generate the cash refunds, which will boost cash flows.
The tax offset is limited to the amount of tax paid in the relevant gain years and its franking account balance at the end of the year in which the entity files its tax return claiming the loss carry back tax offset.
The budget has announced changes in slab of taxable income for residents for the income year 2020-2021 as follows.
| Taxable Income | Rate of tax for 2020-2021 | Rate of tax for 2019-2020 |
|---|---|---|
| 0 to $18,200 | NIL | NIL |
| $18,201 to $37,000 | 19.00% | 19.00% |
| $37,001 to $45,000 | 19.00% | 32.50% |
| $45,001 to $90,000 | 32.50% | 32.50% |
| $90,001 to $120,000 | 32.50% | 37.00% |
| $1,20,001 to $180,000 | 37.00% | 37.00% |
| $180,001 and more | 45.00% | 45.00% |
Apart from this, tax liability can also decrease depending on the eligibility for the LITO. The LITO rate will increase from $445 to $700.
The budget has expand the small business tax concessions to the businesses with aggregate turnover of $50 Million per annum. (increased from $10 million to $50 Million).
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