Federal Budget 2020
www.wsba.com.au
Betting on private sector revival DAVID PRING REASURER Frydenberg has put the challenge to the private sector to pull the flailing economy up by its bootstraps. He has done this through a broad suite of policy initiatives, including brought-forward personal income tax cuts, full expensing for depreciable business investments, wage subsidies to encourage the employment of new staff and reforming insolvency arrangements to aid businesses to continue to trade. Overall, this a Budget with plenty of useful measures for business. The tax loss carry-back rules are a great initiative which will benefit many companies which are still operating well during this crisis and deserve support. This is a smart policy decision which can unlock cash quickly for businesses that have shown they can be profitable. It would be ideal if the carry-back went back further than 2019 but it is still a very substantial act of assistance to companies who have been made profits in previous years but have been battling through the Covid-19 era. It means that companies which suffer tax losses in the 2020, 21 and 22 tax years can carry those losses back and reclaim the tax on the profits they made in 2019 or carry it forward to later years. The expensing of capital assets acquired and installed before June 2022 – an extension of the instant asset write-
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We strongly believe the government should be looking to next year's Budget to roll out serious economic reforms.” - Dr Brendan Rynne off scheme – will also have a significant impact on business decisions. Companies with turnover up to $5B will be able to deduct the full cost of eligible depreciable assets of any value in the year they are first used or installed, and the cost of improvements made during this period to existing eligible depreciable assets can also be fully deducted. This will certainly help with the cost of purchasing capital equipment although, given it is temporary, it is mostly a timing advantage in bringing forward business investment, rather than an investment allowance would have brought a higher cost to the Budget. It also requires
Artist impression of the baggage area at Western Sydney Airport.
companies to have sufficient confidence to invest in the next two years. There are also some other tax measures of note. For groups with international operations there is an important, and much-needed change to the company tax residence rules. Going forward, foreign subsidiaries will only be Australian tax resident where they have a significant economic connection with Australia. This will prevent international subsidiaries from being tax resident on technical grounds and will simplify international tax. The Government will introduce a Fringe Benefits Tax (FBT) exemption for retraining benefits provided to redundant or soon to be redundant employees. Without this measure, FBT would apply at a rate of 47 percent effectively doubling the cost of providing retraining
benefits. In addition, there is a potentially significant win for the reduction of FBT administration costs. The ATO will gain increased powers to allow employers to rely on existing records rather than the current prescribed declarations and other records employers and employees must maintain. This measure will apply from the FBT year commencing April 1 after the enabling legislation is enacted. At the smaller end of the market, there is also an extension of several small business tax concessions to entities with a turnover up to $50M, which should benefit an additional 20,000 businesses. From a business perspective, the bringing forward of the personal tax cuts will also be welcome as they will stimulate economic growth. Overall, it is Continued on page 13
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WESTERN SYDNEY BUSINESS ACCESS OCTOBER 2020
