As a Family Business Advisor we have requested family businesses be recognised as a substantial sector of our economy for years but to date it has fallen on deaf ears. The closest we got was a recognition of small business but we all know family businesses come in all sizes not just small. But a pandemic hits, we slide into recession and there is a call to stimulate our economy and assist Australia out of recession and who are the Government relying on? The private sector, of which family business makes up the majority. It is a welcome change but I do hope once we are out of recession, the Government remembers the sector who supported them and continue to support family businesses.
The Government is looking to the Family Business sector, to employ young Australians, buy equipment and machinery, invest in Research and Development, and offering tax cuts to ensure more funds are available to invest.
So what benefits are in the Budget promises?
Temporary loss carry-back
Eligible companies can apply tax losses during the 2019-20, 2020-2021 and/or 2021-22 income years to offset tax paid in 2018-19 or later income years. The tax refund will be available for eligible businesses when they lodge their 2020-21 and 2021-22 tax returns.
A great initiative and much needed. My only question is, do we have the timing correct or could the 2021 tax return be too late for some businesses? Although businesses are currently hurting, many had a strong 9 months up to 31 March 2020, that although they are struggling in June 2020, they still will record a financial year profit and have tax payable. At a time when they can’t afford to pay the tax. But this benefit wont kick in until they lodge their June 2021 Income Tax Return.
You don’t have to be small’
Previously tax concessions that were offered to businesses with turnovers of less than $10m, now apply to businesses with turnovers of less than $50m. They include:
- Immediate deductions for eligible start-up expenses (from 1 July 2020);
- Immediate deductions for eligible prepaid expenditure (from 1 July 2020);’
- Exemption for the 47% FBT on car parking provided to employees (1 April 2021);
- Exemption from 47% FBT on multiple work related electronic devices (eg phones and laptops) provided to employees (from 1 April 2021);
Incentive to employ
- JobMaker Hiring Credit
Commences 7 October 2020, the credit will be payable for up to 12 months for each new employee aged between 16 and 35. The credit will be paid quarterly in arrears at the rate of $200 per week for those aged 16-29 and $100 per week for those aged 30-35. Eligible employees are required to work a minimum of 20 hours per week and is open to all businesses other than the major banks.
- Apprentice Subsidies
Government has committed an additional $1.2b to pay half the wage for any new apprentice from 5 October 2020. The funding will go towards up to 100,000 employees and is open to any employer hiring an apprentice regardless of location, occupation, industry or business size.
In addition to stimulating business, there are also a couple of strategies available to assist you in building the family wealth.
1. Expanded first home buyer scheme
For parents who have wanted to assist their children in breaking into the property market, this may be your opportunity. The first home buyer scheme has been expanded to allow an additional 10,000 first home buyers to obtain a loan to build or buy a newly built home with a deposit of as little as 5%. The Government has also increased the cap from $750,000 to $950,000.
2. Increase in Self Managed Superannuation members from 4 to 6
It has been hard for families to build wealth within Superannuation, because once you have more than 2 children, you could no longer all be in the one fund. By increasing the members, this allows families to consider their Superannuation as part of the family wealth creation.
A welcome change to see a budget with a focus on Family Business.
Let’s get behind these incredible businesses and ensure they do pull Australia out of recession!