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'Keeping people employed': new tax breaks for small business

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An estimated 20,000 small businesses with annual turnover between $10 million and $50 million are in line for a slew of new tax concessions previously reserved for businesses turning over $10 million or less.

"Small businesses drive the Australian economy, and the small business tax concessions announced as part of the 2020-21 Federal Budget build on the stimulus measures and assistance already in place to assist business owners through the COVID-19 pandemic," Robyn Jacobson from The Tax Institute tells Money.

The concessions will be rolled out in stages.

budget 2020

Straight away, and backdated to July 1, 2020, eligible businesses will be able to deduct select start-up and prepaid expenditures.

Then from April 1, 2021, eligible businesses will be free of the 47% fringe benefits tax on car parking and multiple work-related phones, laptops and other electronic devices.

Finally, from July 1, 2021, eligible businesses will be able to access simplified trading stock rules, remit pay as you go (PAYG) instalments based on GDP-adjusted tax, and settle excise duty and excise-equivalent customs duty monthly on eligible goods.

A simplified accounting method for determining GST will also be expanded to businesses turning over less than $50 million annually.

"This announcement builds on the extensive support provided for small and medium-sized businesses during the COVID-19 crisis that has included JobKeeper, extending the instant asset write-off, providing a cash flow boost of up to $100,000 for employing small businesses, and boosting access to capital through our COVID-19 SME Loan Guarantee Scheme," Treasurer Josh Frydenberg and assistant treasurer Michael Sukkar said in a joint statement.

In short, the tax treatment previously reserved for small businesses will now be enjoyed by larger businesses.

"The exemption from the 47% fringe benefits tax on car parking and employee work devices such as phones or laptops for eligible businesses from April 1, 2021, means that businesses with an aggregated annual turnover of less than $50 million will also be able to enjoy benefits only currently available to smaller businesses," adds Jacobson.

Meanwhile, the Fringe Benefit Tax (FBT) will now be exempt for retraining and reskilling of employees redeployed within a business, whereas before businesses paid FBT if the training was outside an employee's core role.

"Together with the fringe benefits tax exemption on reskilling for employees who are redeployed to a different role in the business, these measures remove impediments and are largely designed to incentivise keeping people employed."

"By removing FBT, employers will be encouraged to help workers transition to new employment opportunities within or outside their business," says Frydenberg and Sukkar.

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David Thornton is a journalist at Money magazine. He previously worked at Your Money, covering market news as producer of Trading Day Live. Before that, he covered business and finance news at The Constant Investor. David holds a Masters of International Relations from the University of Melbourne.
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