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Tax & Accounting19/10/2020 12:00:00 AM

Top Tax Changes for 2020-21

Prepared by: Marcus Lai

Prepared by the Editor-in-Chief for the Australian Master Tax Guide, the following checklist sets out significant changes that are scheduled to operate from the 2020–21 income year. Note that, in some cases, implementation of these changes may be dependent on the future passage of the necessary legislation.

INDIVIDUALS

▪ From 1 July 2020, the top threshold of the 19% personal income tax bracket is increased from $37,000 to $45,000 and the top threshold of the 32.5% bracket is increased from $90,000 to $120,000

▪ From 1 July 2020, changes to the government-funded Paid Parental Leave (PPL) scheme allow primary carers to access parental leave pay more flexibly, particularly birth mothers and adoptive parents who are self-employed or small business owners

▪ Study and training repayment thresholds and rates for 2020–21

▪ The indexed amount of the Dependant (Invalid and Carer) Tax Offset (DICTO) for the 2020–21 income year is $2,816

▪ The low income tax offset (LITO) for the 2020–21 income year is $700

COMPANIES AND SMALL BUSINESS

▪ Eligible companies are able to carry back a tax loss from the 2019–20, 2020–21 or 2021–22 income years to offset previously taxed profits in the 2018–19 or later income years

▪ For private companies with a regular 30 June balance date, the Div 7A benchmark interest rate for 2020–21 is 4.52%

▪ A range of small business concessions are available for medium business entities with aggregated turnover of $50 million over a phased-in period from 1 July 2020 to 1 July 2021

▪ Small business entities and medium business entities are eligible for the temporary full expensing of depreciating assets, including second-hand assets, acquired from 7.30 pm AEDT on 6 October 2020 until 30 June 2022

▪ The threshold for immediate write-off for assets (also known as instant asset write-off) for small businesses has increased to $150,000 until 31 December 2020. For assets not otherwise eligible for the temporary full expensing there is an extension for first use or installation until 30 June 2021

▪ The balance of all small business pools will be immediately deductible for income years ending after 1 July 2020 until 30 June 2022

▪ Certain start-up capital costs for a proposed business are deductible for medium businesses from 2020–21 under the blackhole expenditure provisions


SUPERANNUATION

▪ From 2020–21, a successor fund can claim a tax offset in an income year for no-TFN contributions tax previously paid by the original superannuation provider

▪ The age limit for making spouse contributions is increased from 69 to 74 years from 1 July 2020

▪ Individuals aged 65 and 66 years do not have to meet the work test to make voluntary superannuation contributions (both concessional and non-concessional) from 1 July 2020

▪ Employers are required to offer choice of funds to employees covered by workplace determinations or enterprise agreements made on or after 1 January 2021

▪ The SG amnesty for employers to self-correct historical SG non-compliance ended on 7 September 2020

GOODS AND SERVICES TAX (GST)

▪ The luxury car tax threshold for 2020–21 is $68,740 and the fuel-efficient car limit for 2020–21 is $75,565

FRINGE BENEFITS TAX (FBT)

▪ Employers with an aggregated turnover of up to $50 million will be eligible for the car parking exemption from 1 April 2021

▪ Employers with an aggregated turnover of up to $50 million will be eligible for the work-related items exemption on multiple items from 1 April 2021

LAND TAX

▪ NSW: a new 25% reduction in 2021 land tax on land leased to retail tenants with annual turnover of up to $5 million where the rent is reduced over the period 1 January 2021 to 28 March 2021

▪ NSW: property developers who commence construction of build-to-rent projects on or after 1 July 2020 may be eligible for a 50% reduction in land tax on the land

▪ NSW: trustees of trusts which allow foreign persons to be beneficiaries must have amended the trust deed by 31 December 2020 to avoid liability for foreign owner surcharge

▪ Vic: 2021 liability for vacancy tax has been waived for properties vacant in 2020 due to COVID-19

▪ Vic: for 2021 a full exemption will replace the land tax concession for land used by non-profit clubs for activities of members

▪ SA: changes effective for 2020–21 increase the tax-free threshold, reduce the top tax rate and aggregate land ownership for assessment. Transitional land tax relief is available to taxpayers whose liability increases above a minimum threshold as a result of land aggregation

▪ SA: from 2020–21 owners of land held in trust with a taxable value greater than $25,000 may be assessed at trust rates of land tax

▪ SA: the deadline for trustees of certain discretionary trusts to designate a beneficiary for land tax assessment has been extended to 30 June 2021

▪ WA: changes proposed for 2020–21 will ensure that residential parks with owner-occupied relocatable homes can continue to be licensed as caravan parks and eligible for land tax exemption

▪ ACT: land tax relief originally available in respect of rent reductions for residential tenancies provided over 6 months from 1 April 2020 has been extended to cover rent reductions until 30 June 2021

OTHER CHANGES

▪ The income limits and refundable tax offset amount for the 2020–21 NRAS year have been released

▪ From 1 July 2020, voluntary reporting has been extended to include the employer withholding the child support deductions and child support garnishee amounts from salary or wages that are paid to the Child Support Registrar

▪ To assist businesses affected by COVID-19, the ATO will not apply penalties and interest on excessive PAYG instalment variations for the 2020–21 income year

▪ The GDP adjustment factor for 2020–21 is 0%

▪ The penalty unit has been increased from $210 to $222 for offences committed on or after 1 July 2020

▪ NSW: the annual payroll tax threshold has increased from 1 July 2020

▪ NSW: a reduced payroll tax rate applies from 1 July 2020

▪ NT: the payroll tax exemption for hiring of resident employees is extended to 30 June 2021

▪ NSW: for a 12-month period commencing 1 August 2020, stamp duty has been eliminated for newly built homes below $800,000 with the concession reducing on higher values before phasing out at $1 million

▪ NSW: stamp duty brackets are indexed to CPI for transactions made on or after 1 July 2020. The first indexation occurred with effect from 1 July 2019

▪ New fuel tax credit rates are applicable from 1 July 2020
Download The Checklist: Top Tax Changes in 2020-21