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October 8, 2020

Federal Budget 2020-21: Business tax incentives to support investment and job creation

Research and Development Tax Incentive

The Government will enhance previously announced reforms to invest an additional $2 billion through the Research and Development Tax Incentive (R&DTI).

For small claimants (turnover less than $20 million), the Government will increase the refundable R&D tax offset to 18.5 percentage points above the claimant’s company tax rate, and there will be no $4 million cap on annual cash refunds.

For larger claimants, the Government will streamline the intensity test from three to two tiers and increase the non-refundable R&D tax offset rates. The new rates will be the claimant’s company tax rate plus 8.5 percentage points for initial R&D expenditure up to 2 per cent R&D intensity, and 16.5 percentage points for R&D expenditure above 2 per cent R&D intensity.

The Government will also proceed with the increase in the cap on eligible R&D expenditure from $100 million to $150 million per annum.

The government will also defer the start date of the changes to 1 July 2021, giving certainty to businesses that R&D tax claims made in relation to the 2019–20 and 2020–21 income years would be subject to current enacted legislation.


JobMaker Hiring Credit

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.

The eligible employee must have worked at least 20 paid hours per week on average for the full weeks they were employed over the reporting period

New jobs created until 6 October 2021 will attract the JobMaker Hiring Credit for up to 12 months from the date the new position is created. To be eligible, the employee must have received the JobSeeker Payment, Youth Allowance (Other), or Parenting Payment for at least one of the previous three months at the time of hiring.

Temporary Full Expensing (Instant Asset write off)

From 7:30pm (AEDT) on 6 October 2020 until 30 June 2022, businesses with turnover up to $5 billion will be able to deduct the full cost of eligible depreciable assets of any value in the year they are first used or installed ready for use. The cost of improvements made during this period to existing eligible depreciable assets can also be fully deducted.  

Temporary Loss carry back

The Government will allow companies with turnover up to $5 billion to offset tax losses against previous profits on which tax has been paid to generate a refund.

Losses incurred in 2019–20, 2020–21 and/or 2021–22 can be carried back against profits made in or after 2018–19. Eligible companies may elect to receive a tax refund when they lodge their 2020–21 and 2021–22 tax returns.  This measure will help companies that were profitable and tax-paying but now find themselves in a loss position due to the COVID-19 pandemic.

Written by Mark Bouw Group CFO, Andrew Pittard

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