Thinking | 24 July 2020

2020 Mini-Budget: a reconciliation of previous tax measures

By Peter Murray and Adam Dimac

The Federal Government has released its 2020 Economic and Fiscal Update, coined as the ‘Mini-Budget’.

While Australia has outperformed most other countries in both health and economic outcomes through the COVID-19 crisis, as promised by Treasurer Josh Frydenberg, the numbers are eye-watering.

Budget deficits are estimated to be $85.8 billion in 2019-20, and $184.5 billion in 2020-21.

However, the Treasurer noted that Australia was positioned much better than many other developed economies, that its debt-to-GDP levels would remain comparably low and that Australia would continue to be able to service its interest expenses.

As the full budget will not be delivered until 6 October 2020, the Mini-Budget had little in terms of new tax measures or announcements.

Largely, the Mini-Budget repeats previously announced and implemented tax measures. We have briefly set out below the key tax measures noted in the Mini-Budget, with links to our previous commentary where available.

The JobKeeper Scheme will be extended for a further six months from 28 September 2020 to 28 March 2021, under a two-tiered payment system.

Our detailed article can be found here.

In a welcome announcement, it has been confirmed that the start date for the 2016-17 Budget measure Ten Year Enterprise Tax Plan — targeted amendments to Division 7A has been revised from 1 July 2020, to the income year commencing on or after the date of Royal Assent of the enabling legislation.

Businesses with an aggregated turnover of less than $10 million, that use the simplified depreciation rules, can claim a deduction of 57.5% (rather than 15%) of an assets business value in the year it is added to their small business pool.

Businesses with aggregated turnover of less than $500 million, that do not use the simplified depreciation rules, can claim a deduction of:

  • 50% of the cost of a depreciating asset; plus
  • the amount of the usual depreciation deduction that would otherwise apply, calculated after first offsetting a decline in value of 50%.

Our detailed article can be found here.

The Government has extended the instant asset write-off threshold by six months until 31 December 2020 (previously announced by the Federal Government on 6 June). 

The extension means that eligible businesses, those with an aggregate turnover for the income year of less than $500 million, can immediately deduct the cost of depreciating assets, provided they were purchased for less than $150,000 and are used or installed and ready for use prior to 31 December 2020.

Our detailed article can be found here.

Individuals affected by COVID-19 can withdraw up to $10,000 from their superannuation this financial year, a further $10,000 in 2020-21 to help support them during COVID-19.

The Government has introduced legislation to amend Australia’s hybrid mismatch rules to provide greater certainty and ensure that the rules operate as intended.

The Bill can be found here.

Entities (including not-for-profit organisations, sole traders, partnerships, companies or trusts) with an aggregated annual turnover below $50 million for the previous income year will be provided with two cash flow boosts delivered as credits in the activity statement system.

Eligible entities will receive at least $20,000 of credits, up to a total of $100,000. The credit will be applied against other tax liabilities in the activity statement, and any excess will be refunded.

Our detailed article can be found here.

The Government has increased the Medicare levy low-income thresholds for singles, families, and seniors and pensioners from the 2019-20 income year.

The threshold for singles has increased from $22,398 to $22,801. The family threshold has increased from $37,794 to $38,474. For single seniors and pensioners, the threshold has increased from $35,418 to $36,056.

The family threshold for seniors and pensioners has increased from $49,304 to $50,191. For each dependent child or student, the family income thresholds increase by a further $3,533, instead of the previous amount of $3,471.

  • The start date for the 2018-19 Budget measure Superannuation — increasing the maximum number of allowable members in self-managed superannuation funds and small APRA funds from four to six has been revised from 1 July 2019 to the date of Royal Assent of the enabling legislation.
  • The start date for the 2018-19 MYEFO measure Petroleum Resource Rent Tax — changing the PRRT settings to get a fair return (compliance and administration changes) has been revised from 1 July 2019 to the income year commencing on or after three months after the date of Royal Assent of the enabling legislation.
  • The start date for the 2018-19 Budget measure Tax Integrity – removing the capital gains discount at the trust level for Managed Investment Trusts and Attribution MITs (as amended by the 2018-19 MYEFO measure Revised start dates for tax measures) has been revised from 1 July 2020 to the income year commencing on or after three months after the date of Royal Assent of the enabling legislation.
  • The start date for the 2019-20 Budget measure Superannuation — reducing red tape for superannuation funds (exempt current pension income changes) has been revised from 1 July 2020 to 1 July 2021.
  • The start date for the 2017-18 MYEFO measure Deductible gift recipient reform — strengthening governance and integrity and reducing complexity (as amended by the 2018-19 MYEFO measure Revised start dates for tax measures) has been revised from 1 July 2020 to three months after the date of Royal Assent of the enabling legislation.
  • The start date for the 2015-16 Budget measure Cutting Red Tape – lost and unclaimed superannuation, to allow the ATO to pay lost and unclaimed superannuation amounts directly to New Zealand KiwiSaver accounts, has been revised from 1 July 2016 to six months after the date of Royal Assent of the enabling legislation.

Contact

Peter Murray

Peter is the section leader of the firm's Tax team. Peter has joined Hall & Wilcox in 2016 after...

Adam Dimac

Adam is an experienced tax lawyer, and advises clients on a range of matters including tax planning and structuring,...

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