Federal Budget 2020-2021

Big Benefits for Business

JobMaker Hiring Credit

The Government will introduce a JobMaker Hiring Credit to incentivise businesses to take on additional young job seekers. From 7 October 2020, eligible employers will be able to claim $200 a week for each additional eligible employee they hire aged 16 to 29 years old and $100 a week for each additional eligible employee aged 30 to 35 years old. New jobs created until 6 October 2021 will attract the credit for up to 12 months from the date the new position is created.

The JobMaker Hiring Credit will be claimed quarterly in arrears by the employer from the ATO from 1 February 2021. Employers will need to report quarterly that they meet the eligibility criteria.

The amount of the credit is capped at $10,400 for each additional new position created. Furthermore, the total credit claimed by an employer cannot exceed the amount of the increase in payroll for the reporting period in question.

Eligible employees may be employed on a permanent, casual or fixed term basis and must:

• be aged (at the time their employment started) either:
  • 16 to 29 years old, to attract the payment of $200 per week; or
  • 30 to 35 years old to attract the payment of $100 per week;
• have worked at least 20 paid hours per week on average for the full weeks they were employed over the reporting period;
• have commenced their employment during the period from 7 October 2020 to 6 October 2021;
• have received the JobSeeker Payment, Youth Allowance (Other), or Parenting Payment for at least one month within the past three months before they were hired;
• be in their first year of employment with this employer and must be employed for the period that the employer is claiming for them; and
• not also be receiving a wage subsidy under another Commonwealth program.

Eligible employers must:

• have an ABN;
• be up to date with tax lodgement obligations;
• be registered for Pay As You Go withholding;
• be reporting through Single Touch Payroll;
• be able to demonstrate that the credit is claimed in respect of an additional job that has been created i.e. there must be an increase in the total employee headcount;
• not be claiming the JobKeeper payment.

Employers do not need to satisfy a fall in turnover test to access the JobMaker Hiring Credit.

Temporary full write-off of capital assets

From Budget night until 30 June 2022, businesses with a turnover of up to $5 billion will be able to deduct the full cost of eligible depreciable assets of any value in the year they are installed, provided the following requirements are met:

• The asset was acquired from 7:30pm AEDT on 6 October 2020 (i.e., Budget night).
• The asset was first used or installed ready for use by 30 June 2022.
• For businesses with an aggregated turnover of $50 million or more, the asset must be a new depreciable asset or is the cost of an improvement to an existing
  eligible asset. Current thresholds still apply for second-hand assets.

Temporary loss carry back for eligible Companies

The Government has announced that it will introduce measures to allow companies with a turnover of less than $5 billion to carry back losses from the 2020, 2021 or 2022 income years to offset previously taxed profits made in or after the 2019 income year.

This will allow such companies to generate a refundable tax offset in the year in which the loss is made. The tax refund is 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 companies when they lodge their tax returns for the 2021 and 2022 income years. Note that, companies that do not elect to carry back losses under this measure can still carry losses forward as normal.

Insolvency Reforms

Currently, the insolvency system faces a number of challenges. These include an increase in the number of businesses in financial distress due to COVID-19, a ‘one-size-fits-all’ system, and high costs and lengthy processes that can prevent distressed small businesses from engaging with the insolvency system early thereby reducing their opportunity to restructure and survive.

The Government will implement certain insolvency reforms, effective from 1 January 2021 (subject to the passing of legislation) to support small business, including the following:

• The introduction of a new streamlined process to enable eligible incorporated small businesses in financial distress to restructure their debt.
• Simplifying the liquidation process to allow faster and lower-cost liquidations, increasing returns for creditors and employees.
• Support for the insolvency sector to ensure it can respond effectively to increased demand and to the needs of small business.

Temporary insolvency and bankruptcy protections that were introduced in March 2020 to provide relief for businesses impacted by COVID-19 are due to expire on 31 December 2020 (e.g. under these measures, directors are temporarily relieved from personal liability for trading while insolvent). However, the number of companies being put into external administration is expected to increase significantly, putting additional stress on the system. Therefore, the above proposed reforms will help more businesses to successfully get to the other side of the crisis.