Some Australian workers may start to see some extra dollars in their bank accounts this month as the Federal Government’s Budget 2020 tax measures start coming into effect.
The tax cuts were initially scheduled to happen two years from now but were brought forward to give the economy a boost in the wake of COVID-19.
Changes to the tax system will mean that from 1 July 1 2020:
- the low income tax offset will increase from $445 to $700;
- the top threshold of the 19 per cent tax bracket will increase from $37,000 to $45,000; and
- the top threshold of the 32.5 per cent tax bracket will increase from $90,000 to $120,000.
The cuts will mean that a person earning $120,000 a year will receive a boost of $47 a week, while someone on $60,000 would see about $20.77 extra a week.
In addition to the above, low- and middle-income earners will receive a one-off tax benefit of up to $1,080 for the 2020-21 financial year.
Around 11 million Australians are expected to see some benefit from the tax cuts, providing people with more money to spend on the things they need.
Tax cuts for businesses
To help keep Aussie businesses strong there are also a number of tax initiatives in place for businesses.
Businesses with a turnover of up to $5 billion will be able to immediately deduct the full cost of eligible depreciable assets acquired from 7:30pm (AEDT) on 6 October 2020, as long as they are first used or installed by 30 June 2022.
To complement this, the Federal Government will also temporarily allow companies with a turnover of up to $5 billion to offset tax losses against previous profits on which tax has been paid.
In normal times, businesses would have to return to profit before they can use their losses, however, these have certainly not been normal times for businesses.
Losses incurred to June 2022 can be offset against prior profits made in or after the 2018-19 financial year.
The Government is also providing businesses with an aggregated annual turnover between $10 million and $50 million access to up to ten small business tax concessions.
On top of all these changes, the Government will be enhancing previously announced reforms to invest an additional $2 billion through the Research and Development Tax Incentive.
All of these changes have been designed to help support businesses and keep people in jobs.
Those looking for more information on the Australian tax system can find it on the ATO website.