Practice Updates November 2020 from Bayview Accounting & Tax and the National Tax & Accountant’s Association (NTAA).
Tax relief for individuals
The Government brought forward ‘Stage two’ of their Personal Income Tax Plan by two years, so that, from 1 July 2020:the low-income tax offset increased from $445 to $700
the top threshold of the 19% tax bracket increased from $37,000 to $45,000
the top threshold of the 32.5% tax bracket increased from $90,000 to $120,000.
In addition, in 2020/21, low and middle-income earners will receive a one-off additional benefit of up to $1,080 from the low and middle-income tax offset.
Tax relief for business
Businesses with a turnover of up to $5 billion are now able to immediately deduct the full cost of eligible depreciable assets as long as they are first used or installed by 30 June 2022.
To complement this, the 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.
Also, businesses with an aggregated annual turnover between $10 million and $50 million will, for the first time, be able to access up to ten small business tax concessions.
Under the changes passed by the Parliament, the Government will also enhance previously announced reforms to invest an additional $2 billion through the Research and Development Tax Incentive.
The ATO has said that employers now need to make adjustments in their payroll processes and systems in order for the tax cuts to be reflected in employees’ take-home pay.
Employers must make sure they are withholding the correct amount from salary or wages paid to employees for any pay runs processed in their system from no later than 16 November onwards.
Employees should be aware that any withholding on the old scales will be taken into account in their tax return.
For companies to utilise their carried-forward losses in a particular year, they need to satisfy the continuity of ownership test or, if they fail that test, they need to satisfy the business continuity test (‘BCT’).
Whether a company can utilise carried-forward losses requires a consideration of its facts and circumstances.
Generally, a company that has completely closed its business with no intention to resume will fail the BCT. However, a company that has temporarily closed its business may still be able to satisfy the BCT.
Importantly, the mere receipt of JobKeeper payments will not cause a company to fail the BCT.
As such, superannuation funds can assume that all members in receipt of the JobKeeper subsidy satisfy the ‘work test’ when determining whether they can make voluntary superannuation contributions.