instant tax expensing’ big win for small and medium businesses (3)

Federal Budget 2020 -2021: ‘instant tax expensing’ big win for small and medium businesses

Nearly 99% of businesses in Australia will be able to instantly write-off work assets as part of a much-needed measure to stimulate the economy.

Big news for small and medium business owners! The Federal Budget announced by Treasurer Josh Frydenberg, contains several measures that will offer urgent relief to struggling small and medium businesses.

The good news comes hot on the heels of a difficult six months for businesses around Australia who have struggled with losses due to covid-19.

During his speech, the Treasurer addressed the struggles faced by millions of small and medium businesses during the Covid lockdowns and the heavy restrictions that severely impacted them. “COVID-19 has turned fundamentally sound businesses into loss making businesses. Normally, businesses would have to return to profit before they can use these losses. But these are not normal times. In order to keep their workers, these businesses need our help now.”

Here’s a summary of what benefits small and medium businesses can expect to receive

instant tax expensing’ big win for small and medium businesses (2)

Instantly write-off full value of work assets with Instant Asset Write Off

Adding to the successful increase of the Instant Asset Write Off earlier this year – from $30,000 to $150,000, the new budget expands the Instant Asset Write Off for businesses with turnover of less than $5 billion, going into immediate effect from 6th October 2020 until 30th June 2022.

The tax break which is applicable to small, medium and larger businesses is part of an incentive to fuel the economy and businesses hurt by COVID-19.

  • Businesses will be able to write off the full value of any eligible asset they purchase.
  • The threshold applies on a per asset basis, so eligible businesses can instantly write-off multiple assets, each valued under $150,000 that are purchased by December 31 2020.
  • The full write-off is also applicable on second-hand assets for small and mid-sized businesses with an annual turnover of less than $50 million.
  • Businesses with annual turnover between $50 million and $500 million can still deduct the full cost of eligible second-hand assets costing less than $150,000 that are purchased by December 31 2020.
  • Businesses that hold assets eligible for the enhanced $150,000 instant asset write-off will have an extra six months until 30 June 2021.

The new write off is expected to push more business owners to invest in workplace upgrades, buy equipment, and invest in their digital infrastructure in order to increase productivity and profits.

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Loss carry-back for businesses

The program will provide cash benefits to businesses running at a loss, by putting money back into the business.

The Federal Government is allowing businesses with a turnover up to $5 billion to offset their losses against previous profits on which tax has been paid, to gain a refund. Losses incurred can be offset against prior profits made in or after the 2018-19 financial year.

Eligible companies may elect to receive a tax refund when they lodge their 2020‑21 and 2021‑22 tax returns.

It is estimated that the loss carry-back measures in combination with the tax write off will provide a boost to the economy and create an additional 50,000 jobs in Australia.

instant tax expensing’ big win for small and medium businesses (1)

JobMaker Hiring Credit 

The new JobMaker Hiring Credit scheme gives employers an incentive to hire additional staff who are jobseekers aged between 16 to 35 years old. The scheme is expected to help fast-track growth in employment of younger workers and increase training opportunities in the workforces during the recovery stage.

Under the new scheme, businesses will obtain a credit of $200 per week for every employee aged up to 30 years old, and an additional $100 per week for someone aged 30 to 35 years old. The incentive is applicable during the next 12 months for new hires who work a minimum of 20 hours per week.

Incentives for Research and Development

$2 billion will be provided as incentives for additional Research and Development. This will remove the cap on refunds, lift the rate and reward those businesses that invest the most.

The adoption of digital technology, and affordable, reliable energy was highlighted by Treasurer Frydenberg as 2 critical points for the country’s economic development.

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Extending Victoria’s support grants program to other states

The Federal Government will make Victoria’s business support grants for SMEs non-assessable, non-exempt (NANE) income for tax purposes.

This arrangement will be extended to all states and territories on an application basis, with eligibility restricted to future grants program announcements for small and medium businesses facing similar circumstances to Victorian businesses.

Eligibility will be limited to grants that were announced on or after 13 September 2020, and for payments made from September 2020 until 30 June 2021.

An investment of $1.2 billion to help hire 100,000 new apprentices

Funding will be made accessible to employers across Australia, regardless of location or size of business, who engage an apprentice or trainee from 5th October 2020, until the 100,000 cap is hit. Employers are eligible for 50 per cent of the wages for a apprentice or trainee up to 30 September 2021.

Reduction in personal income tax

The income tax reduction will also be big news for small and medium business owners. The cashback money is set to be delivered straight away, with tax cuts originally scheduled for 2022 to be backdated to 1st July 2020.

To see Government initiatives that were introduced earlier this year in support of businesses during the start of the Covid-19 lockdown, click here.


Please speak to your tax accountant for all tax and investment related advice. Information provided above does not constitute advice.