As a business owner you’ve experienced the ups and downs of 2020. From pandemic shutdowns, job losses, a deepening recession and pivoting businesses, this has been an extraordinary year for Australia and the world. So, it’s no surprise that the federal budget 2020-21 has been designed to help us rebuild the economy, create jobs and secure Australia’s future.
But how does it affect your business?
The Federal Budget 2020-21 affects businesses primarily through amendments to three schemes: first, the Instant Asset Write Off Scheme, second, the Motor Vehicle Write Off Scheme and third, the Loss Carry Back Provisions.
Under the proposed amendments, the Instant Asset Write Off (IAWO) has been expanded. Businesses with a turnover of less than $5 billion are able to claim an immediate write-off of the full value of new, eligible and depreciable assets that are first used or installed before 30 June 2022. And businesses with a turnover of less than $50 million will be able to apply the incentive to the full expensing of second-hand assets.
Previously the IAWO had a ceiling for the price of these purchases. However, now that ceiling has been fully lifted. This means there are plenty of options for investing in your business.
When it comes to motor vehicle purchases, the motor vehicle writeoff amount is still limited to the business use percentage of a new car up to $59,136. But, if the purchase is for a vehicle that carries nine passengers or more or weighs more than a tonne, this limit is waived. In that case you can claim the full amount of the car.
It’s important to recognise that your business won’t receive the full value of the car back. But you will be able to claim the full value against your income. So, if you’re a small company with a base tax rate of 26%, you would save 26 cents on the dollar for this new car purchase.
Under the proposed amendments to the Loss Carry Back provisions, eligible businesses with less than $5 billion annual turnover that have paid income taxes and made taxable losses, can now claim a refundable tax offset. In other words, they can ‘carry back’ losses made in the 2019-20, 2020-21 and 2021-22 financial years to a previous years income tax liability.
If the amendments are ratified, the Loss Carry Back provisions could provide much needed additional cashflow for your business. However, you’ll need to wait 12 months to access the tax refunds. The first refunds won’t be available until the 2021 taxation year.
The Federal Budget 2020 also has some tax amendments and other proposed amendments that could affect you as an individual. Have a look at our article, ‘The 2020 Federal Budget and What It Means For You as an Individual’[insert link] for more details.
At this stage the individual taxation rates have already been ratified by the government. However, the remaining elements of the federal budget 2020-21 will need to be ratified before coming into effect. Once they are ratified, you’ll have access to benefits as an individual and as a business owner.
Now is an excellent time to speak to your specialists – your accountant, financial adviser or finance broker – to find out how you can utilise these tax breaks and other economic support to your best advantage.
We’d love to help you take advantage of the tax and other benefits in the federal budget 2020. Whether you’d like to buy an investment property or a new business asset, we can help. Get in touch.
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