If you’re a business owner, you are probably very interested in way that you can make your company more profitable. One important strategy for any organization is to take advantage of various government incentives that are offered.
For Australian businesses, there are a myriad of write-offs, provisions, and credits that can be leveraged to provide more money towards your bottom line. This article will explore some of the major incentives provided in legislation for the upcoming year and how your organization can take advantage of them.
Instant Asset Write-off
This is not a new program but was rather extended in an effort to help businesses rebound in recovery from the COVID-19 pandemic. Essentially, any business with up to AUD $5 billion in annual aggregated turnover may elect to deduct the full cost of depreciable assets in the year they are installed. What does this mean for your business? For any depreciable assets purchased between 6 October 2020 and 30 June 2022, this incentive is available.
Furthermore, businesses with between AUD $50 million and AUD $500 million of aggregated turnover can also deduct the full cost of eligible second-hand assets that cost less than $150,000 as long as they are purchased by 31 December 2020. For small businesses (those with less than AUD $10 million in annual aggregate turnover), they deduct the balance of their simplified depreciation pool at the end of the income year during the period where full expensing applies.
JobMaker Hiring Credit
If you are hiring new employees, you may be eligible for the JobMaker Hiring Credit. This credit is aimed at helping get Australians back to work with the economy opening and applies to any business who hires an eligible employee.
What makes an employee eligible under this credit? They must be between 16 and 35 years old and have been on the JobSeeker unemployment program, received a youth allowance, or a parenting payment in the three months prior to being hired.
Employers taking advantage of this credit will receive $200 per week for new employees between 16 and 29 and $100 per week for those between 30 and 35. There are some exclusions to which organizations can participate including those already taking part in the JobKeeper program and sovereign entities.
Loss Carry-back Provisions
Any corporate tax entity with aggregated turnover of less than AUD $5 billion is eligible for a carry-back filing. This allows tax losses from 2019-20, 2020-21, or 2021-22 to be used to offset profits that were previously taxed in 2018-19 or later years.
This is a big benefit for businesses as it provides additional protection against losses. This carry-back provision will create a refundable tax credit in the year where the loss is made. It can be claimed when businesses file their 2020-21 and 2021-22 tax returns.
Research and Development Incentive
This incentive applies specifically to R&D entities. Small ones will be allowed to have an offset 18.5% above their tax rate with no refundable limit. Meanwhile, large R&D entities will see their intensity tiers reduced from three to two. For these organizations, the offsets will be 8.5% and 16.5% above their tax rate.
Australia is providing tax incentives in the form of credits, carry-backs, and write-offs for many businesses in hopes of stimulating the economy. Business owners should consider how these credits affect them and make a plan for ensuring they receive the credits their business is eligible for.