#228 Federal Budget 2020 summary
AMA Victoria’s accounting and taxation preferred partner, Bongiorno Group, summarises the key information from the Federal Budget.
The Treasurer said: “The budget is all about jobs”, so there are big benefits for small to medium businesses, particularly the health sector.
With a return to consulting and surgery hopefully moving closer towards a more normal routine, the incremental backlog of work and ever-growing waiting lists will no doubt keep doctors extraordinarily busy, but this will also translate into opportunities for job growth.
Key budget announcements include:
The Federal Government will bring forward the income tax cuts for most income brackets scheduled for 2022 to 1 July 2020. Tax relief will benefit all doctors, particularly HMOs and residents earning $48,000 - $90,000 and lesser between $90,000 - $126,000.
The backdated tax cuts will be introduced in two stages:
- Stage 1: from 1 January 2021, the reduced tax rates will kick in
- Stage 2: from 1 July 2020 to 31 December 2020, a refund of tax will automatically apply upon lodgement of your 2021 tax return.
New tax scales for 2020-21 to 2023-24
Tax scales from 2024-25
Immediate asset write-off
From budget night, the immediate deduction of assets acquired and first used or installed by 30 June 2022 are eligible for expensing. For example, all medical and office equipment including software will be available for an immediate tax write off, reducing your taxable income.
State Government grants
The Federal Government will amend the tax law to make the Victorian Government business support grants for small and medium businesses non-assessable and exempt for income tax purposes. Other states may optionally request to participate. This is great news for all medical practice clients who have received the Victorian support grant.
Temporary carry back losses
From 1 July 2020, companies can carry back losses in each of 2019/20, 2020/21 and 2021/22 tax years against any profits in 2018/19 or later years. The carry-back will give rise to cash refunds of tax previously paid upon lodgement of the company’s 2021 tax return.
Warning: Carry back losses should not apply to medical incorporations (doctors working under a company structure) as ordinarily profits and losses are expensed as wages to the doctors. Should there be instances to the contrary, we would ask that you discuss this anomaly with your accountant.
Eligibility requires that new jobs must be created between 7 October 2020 and 6 October 2021. The subsidies will be available to newly created jobs at the rate of $200 a week for each additional eligible employee aged 16 to 29 years and $100 a week for those aged 30 to 35 years. Employers will be able to register for the scheme from 7 December 7 2020, via the ATO website.
Note: The main requirement for the new employees is that they must have been receiving one of these three forms of welfare in the three months before they were hired:
- JobSeeker, Youth Allowance (other) and the Parenting Payment.
- They must also be working at least 20 hours a week on average in their new jobs
- As for the requirements on businesses, they cannot be claiming the JobKeeper payment if they want to take part in JobMaker (no double dipping).
The Treasurer announced that the government will amend tax law to provide a capital gains tax exemption for granny flat arrangements whether it is a formal written agreement or otherwise. The change will only apply to agreements that are entered into because of family relationships or other personal ties and will not apply to commercial rental arrangements.
This is such a relief to all that your home will be free of capital gains tax should you have a granny flat arrangement in place.
Government boost to first home buyers
The scheme enables first home buyers to get into the market with a deposit as low as 5 per cent, while avoiding lender's mortgage insurance as the Federal Government will act as guarantor.
For those AMA Victoria members looking to invest in their first home, the Victorian price caps seen below are $850,000 and $550,000 respectively.
Jim Tsirtsakis BBus (Acc)
DipFP, CFP® FIPA FFA, CTA, Cert.IV FMB
Director, Bongiorno Group
(03) 9863 3177