Tax breaks for Businesses from Federal Governments 2020 budget

By on November 18, 2020

Below is a PLAIN SPEAK table & summary of the Temporary Full Expensing of Depreciating Assets tax incentives and Loss “Carry Back” Tax Opportunities announced in the Federal Government’s 2020 Budget on 6th October 2020.

The Government will support businesses by enabling them to deduct the full cost of eligible capital assets acquired from 7:30pm AEDT on 6 October 2020 (Budget night) and first used or installed by 30 June 2022.

Businesses (turnover < $50M) are able to deduct the full cost of eligible capital assets (both new and second hand) and cost of improvements to existing eligible assets acquired from 7:30pm AEDT on 6 October 2020 and first used or installed by 30 June 2022.

Businesses (turnover $50 – $500m pa) can still deduct 100% of eligible second-hand assets costing < $150K ex GST that are purchased by 31 December 2020 and first used or installed by 30 June 2021.

Small businesses (turnover < $10m pa) can also deduct the balance of their simplified depreciation pool at the end of 2021 and/or 2022.

The Temporary Loss “Carry Back” Tax Opportunities

  • Corporate tax entities with turnover < $5 billion pa can apply tax losses against taxed profits in a previous year, generating a refundable tax offset in the year in which the loss is made. The tax refund would be limited by requiring that the amount carried back is not more than the earlier taxed profits and that the carry back does not generate a franking account deficit.
  • The tax refund will be available on election by eligible businesses when they lodge their tax returns for 2020-21 and 2021-22-income years.

What is a Franking Account Deficit?

  • The loss carry-back tax offset cannot outweigh the value of past taxes paid that have not already been distributed to shareholders as franking credits via Dividends.
  • This is designed to avoid the past payment of tax providing a double benefit. This double benefit could otherwise arise because shareholders received an imputation credit in relation to company tax that, because of loss carry-back, the company had effectively no longer paid.

If you would like to know more, the Government Fact sheet link here has excellent explanation with examples (see pages9-12) https://budget.gov.au/2020-21/content/factsheets/download/tax_fact-sheet.pdf

Miles Beamish, Partner Equipment Finance (VIC)
M: 0410 774 506
E: miles@finlease.com.au
W: finlease.com.au
(CMPA Associate Member since 2015)

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