Tax cuts for 11 million Australians will flow in the coming weeks after the Morrison Government secured the passage of the legislation through the Federal Parliament last Friday.
The tax relief package, for both individuals and business, is part of our COVID-19 Economic Recovery Plan for Australia to create jobs, rebuild our economy and secure Australia’s future.
The Australian Taxation Office (ATO) will update its schedules next week, with software payroll companies to update over the coming weeks.
Prime Minister Scott Morrison said the business tax relief measures are being rolled out to help keep businesses to stay afloat, to grow and to hire more people.
“It is estimated our tax relief package to reduce the personal income tax burden and encourage business investment will create around 100,000 jobs by the end of 2021-22 and boost GDP by around $6 billion in 2020‑21 and $19 billion in 2021-22,” he said.
Tax relief for business
Businesses with a turnover of up to $5 billion are now able to immediately deduct the full cost of eligible depreciable assets as long as they are first used or installed by 30 June 2022.
The Government will also temporarily allow companies with a turnover of up to $5 billion to offset tax losses against previous profits on which tax has been paid.
Businesses with an aggregated annual turnover between $10 million and $50 million will, for the first time, be able to access up to ten small business tax concessions.
Under the changes passed by the Parliament the Government will also enhance previously announced reforms to invest an additional $2 billion through the Research and Development Tax Incentive.
Updates to tax withholding schedules
The Australian Tax Office says it is ready to implement the measures announced in the 2020 Federal Budget.
“In accordance with longstanding practice, the ATO will publish updated tax withholding schedules as soon as possible after bipartisan support has been confirmed for the Treasury Laws Amendment (A Tax Plan For The Covid-19 Economic Recovery) Bill 2020 containing the amendments to bring forward the announced tax cuts,” the ATO said.
“We will publish updated tax withholding schedules at ato.gov.au/taxtables. Employers may need a short time to make the changes in their payroll processes and systems in order for the tax cuts to be reflected in people’s take home pay.”
The ATO will work closely with providers of payroll software and employers to ensure the reduced withholding associated with the threshold changes and the increase of LITO is reflected in software as soon as practicable.
The adjustments to the withholding schedules are designed to ensure that taxpayers have the correct amount of tax withheld from their pay going forward. It is not possible for the ATO to determine the extent of ‘over-withholding’ that may have occurred for each and every taxpayer as this is highly dependent on individual circumstances and will be different for everyone. Any ‘over-withholding’ that occurred prior to the employer updating their payroll software and processes will be included in the tax assessment of the employee at the end of the income year.
