Pittwater Life November 2020 Issue

Business Life: Money
with Brian Hrnjak
Business Life
What happens when the
Federal Budget goes viral
This month we take a
brief look at the recent
Federal Budget from
a business perspective; and
wasn’t it a strange budget
experience! A Federal
Budget being handed down
in October instead of May,
well that’s odd in itself, but
then with all of the spending
coming from a Liberal
treasurer it turned into a bit
of a freak show. “A pretty
good Labor budget” one
writer in The Sydney Morning
Herald commented. This may
be true, but this year more
than any other in a long time
probably calls for a pragmatic
approach.
I have cherry picked some
of the budget highlights that
would be of benefit to most
of the small and medium
businesses operating in our
area:
Capital asset write-offs
Prior to the budget, small
businesses were able to
expense capital assets costing
up to $150,000 and installed
for use before 31 December
2020. In a nutshell, the Budget
has uncapped this amount
and extended the time limit
through to 30 June 2022.
As with most things the
government “gives” you,
there are conditions: first,
the turnover of your business
is relevant but I’m assuming
a small business here is
less than $50 million. Cars
always come up as part of
this discussion and you need
TAX CUTS: On the agenda.
to know that a depreciation
threshold on motor vehicles
of $59,136 applies – so don’t
order a shiny new car over
that amount assuming it can
be deducted in one year, plus
you have to allow for any
private use component that
will also limit your deduction.
Be aware, however, that this
depreciation threshold does
not apply to vehicles that
can carry a load over one
tonne, or that can transport
nine passengers. Another
exclusion to be aware of
applies to capital works –
things such as buildings or
alterations to a building,
structural improvements,
or earthworks. The point is,
at the margin, accelerated
depreciation can be
complicated so if you are
contemplating the purchase of
a significant asset it would be
wise to schedule a chat with
your adviser.
The last point to take notice
of is the growth in both scale
and reach of this concession
over many years. The reason
why it gets trotted out so
often at budget time is simple:
it costs the government very
little and plays off the short
time horizons of individual
taxpayers versus the
theoretically unlimited time
horizon of the government.
In accountant’s parlance, it’s
just a timing difference – but
don’t let that stop you buying
a new asset, just don’t let it
be the only reason why you
bought it.
Carry-back loss
provisions for companies
Unlike certain former
ABC journalists, most
businesspeople realise that if
you incur a loss when running
your business you need to
make up that loss in the future
before you become liable
for further income tax on
profits. This particular budget
incentive works in reverse
allowing companies (and only
companies) that have made
profits in the financial years
64 NOVEMBER 2020
The Local Voice Since 1991
between 1 July 2018 and 30
June 2021 to obtain a refund
against losses they have
incurred between 1 July 2019
and 30 June 2022.
The reason why only
companies are eligible is
that this refund is generated
against the company’s
franking credit account and
the scale of any refund is
limited to the balance of the
franking account and cannot
create a deficit. Companies
that clean out their franking
accounts will need to make
profits and pay company
tax in the future before
they can go onto to pay
franked dividends to their
shareholders.
Personal Tax Cuts
I won’t bore you with the
rundown of the brackets but
The Sydney Morning Herald
quoted some post-budget
analysis from the BankWest
Curtin Economics Centre
that around three quarters of
Australians will be better off
as a result of the combination
of brought forward tax cuts,
extension of low and middle
income offsets, two $250
payments to pensioners and
the Corona Virus supplement
paid to those on JobSeeker
benefits.
More importantly for
business owners, in the week
following the Budget the
Herald went on to report a
strong jump in the regular
Westpac survey of consumer
confidence to a two year high
that economist Bill Evans
described as “extraordinary”
and attributed to the
Budget as well as improving
containment of the virus.
When tax planning this
financial year, it would pay to
keep an eye on the thresholds
of $45,000 and $120,000 as
these are the points that mark
the start of new tax brackets
as well as the end point of tax
offsets. For example, salary
sacrificing superannuation on
an income of $45,000 is no
longer economic when you
consider the average rate of
income tax combined with tax
offsets – you’d be better off
taking the funds as wages.
The tax cuts contained
The Local Voice Since 1991
in the budget have been
backdated to 1 July and
legislated so they will
manifest themselves as lower
PAYG withholding for most
businesses when they prepare
their BAS. The tax offsets
should any apply will become
available when an individual
lodges their 2021 tax return.
JobMaker Hiring Credit
This is an age-based hiring
credit for new employees
engaged for 20 or more hours
per week who were previously
on JobSeeker, Youth Allowance
or Parenting Payment. Paid at
the rate of $200 per week for
those aged 16 to 29 and $100
per week for those aged 30
to 35, the concession is for
12 months from the date of
employment.
Apprenticeships
wage subsidy
From 5 October 2020 to 30
September 2021, businesses of
any size will be able to claim
a Boosting Apprentices Wage
Subsidy for new apprentices
or trainees who commence
during this period. Employers
will be reimbursed up to 50%
of an apprentice or trainee’s
wages up to $7,000 per
quarter subject to a national
cap of 100,000 places.
The government may have
wanted to splash around
the word ‘apprenticeship’
in the budget papers but
a quick look around at the
traineeships on offer shows
there is a strong diversity of
training available in nontrades
areas such as office
work that should mean the
scheme is well supported.
Brian Hrnjak B Bus CPA (FPS) is
a Director of GHR Accounting
Group Pty Ltd, Certified
Practising Accountants. Offices
at: Suite 12, Ground Floor,
20 Bungan Street Mona Vale
NSW 2103 and Shop 8, 9 – 15
Central Ave Manly NSW 2095,
Telephone: 02 9979-4300,
Webs: www.ghr.com.au and
www.altre.com.au Email:
brian@ghr.com.au
These comments are of a
general nature only and are
not intended as a substitute
for professional advice.
NOVEMBER 2020 65
Business Life