The Federal Government Budget 2020-21 – Businesses in Recovery Mode
The COVID 19 pandemic has had a severe impact on our business economy and dented business confidence as it has all around the world. The Australian Federal Government Budget for 2020-21 was recently released. The Government’s economic response is designed to support Australian households and businesses to recover from the impact of this difficult period. With this budget, the Government hopes for a strong and sustained economic recovery. The business community echo these sentiments!
Temporary Full Asset write-offs for Businesses
A key feature of the budget are the Business tax incentives to support Australia’s economic recovery. These incentives are aimed at helping businesses invest and create more jobs. Businesses will now be able to temporarily fully write-off eligible depreciable assets up to $150,000 for all businesses in Australia with a turnover of up to $5 billion a year. From next year, this instant asset-write off also includes businesses that turn over less than $10 million. The eligible businesses can instantly write-off multiple assets, each costing less than $150,000 that are purchased by December 31, 2020. This will help in writing off multiple assets as the threshold applies on a per asset basis. This move is expected to benefit around 3.5 million businesses, which is roughly 99 percent of Australian enterprises. Another tax incentive is the temporary loss carry-back. Under this benefit, businesses with a turnover of up to $5 billion will be able to temporarily offset tax losses against profits and tax paid during or after 2018-19. These two measures combined are expected to bring about $31.6 billion in tax relief, which will further pump in $200 billion worth of investment into the Australian economy.
Budget 2020-21 supporting digitalisation
The Government is also accelerating the digital transformation to increase productivity and jobs growth to bring Australia closer to its aim of becoming a leading digital economy by 2030. Digitalisation will lower business costs, enhance consumer choice and allow the business to choose how they interact with customers and shareholders.
To support this drive, the Australian Federal Government Budget is providing $24.7 million to help small business operators use technology to improve their processes. An amount of $419 million is allocated to modernise business registers and $256 million to expand the Digital Identity initiative. These investments will make it simpler and easier to start and run a business and interact with Government.
What do these incentives mean for businesses?
The instant write-off tax incentives and the push for digital transformation is a great opportunity for businesses to free up capital for investment. This investment can be pumped back into the business and help in recovering from the current pandemic impact and prepare it for the unexpected with the help of digital technology.
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Depreciation – A decrease in the value of an asset over time due to wear and tear
Turnover – The income of a business for a particular period of time