Food Manufacturers to Benefit from Federal Government Budget Write-Off Scheme
The COVID-19 recovery budget for 2020-21 was announced earlier in October, and it seems businesses both big and small will benefit, receiving almost twice as much in tax breaks as households.
Businesses across a number of industries, including food manufacturing and processing, are projected to receive $31.6 billion in tax breaks from the budget. That is almost double the $17.8 billion brought forward for personal tax cuts.
These business tax cuts are temporary in nature, allowing businesses that have suffered as a result of the pandemic to claim back recent taxes paid. In turn, the scheme sets to encourage immediate investment through the full tax deductions.
Known as ‘immediate expensing’ and ‘loss-carry back’, the measures put in place in the new budget are now being offered to companies with a turnover from $50 million and up to $5 billion. By introducing the new instant asset write-off scheme, the Government hopes to encourage corporate spending and investment, stimulating $200 billion of business investment by the way of new machinery and equipment.
The scheme also extends to those businesses that make a turnover of less than $50 million, with these companies able to claim the full cost of all eligible second-hand assets.
Under the ‘immediate expensing’ measure, businesses are now able to deduct the full cost of an eligible asset within the first year of it being used or installed. As compared to previous times where only a portion was tax deductable in the first year and the rest depreciated over later years, now the full amount of an asset is able to be claimed up front. This in turn reduces the amount of tax a business will pay, and encourages businesses involved to invest more, now.
The instant asset write-off is also being extended by Government. Businesses with a turnover of up to $500 million are able to instantly write-off numerous assets worth up to $150,000 each. The extension allows for an extra six months, up until June 30 2021, for businesses to use or install assets purchased by the end of the year.
The ‘loss carry-back’ measure means businesses will no longer have to wait until they next show profit to receive any tax benefits under the new budget. Before, if businesses made a loss, they would have to wait until it begins to profit to claim this as an offset on their tax bills. Now, companies with a turnover of up to $5 billion can now receive a cash refund of taxes paid on previous profits if they do post a loss.
Speaking on the new budget announcement, Treasurer Josh Frydenberg said “It is a game changer. It will unlock investment. A trucking company will be able to upgrade its fleet, a farmer will be able to purchase a new harvester and a food manufacturing business will be able to expand its production line.”
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