Updated: Oct 14, 2020
Australia may have been luckier than other countries on the toll COVID has had. However, the economy is probably the worst affected so far. In a bid to soften the blow and issue a timely mitigation strategy, the Australian government issued some key measures in the latest federal budget to address entrepreneurs and SMEs. These measures will also largely benefit franchises in many industries who are feeling the pressure.
Some of the key measures relevant to the franchising sector in the SME arena will include:
Uncapped instant asset write-offs for business;
Small business tax concessions;
Loss carry-back tax provision;
$552.9 million in measures to support regional Australia;
Wage subsidies for apprentices and trainees; and
JobMaker hiring credit payable for up to 12 months to employers hiring young people between the ages of 16 and 35.
$15 billion in JobKeeper payments (currently known as Jobkeeper 2.0);
The above are unprecedented measures which we hope get availed sooner rather than later and our team in Australia is working assisting international and local Franchises to assess how they can quickly strategise on making the most of the next months with planned spend in key states.
The instant asset write-off
Businesses with an aggregated annual turnover of less than $5 billion can claim an immediate tax deduction for the full cost of eligible capital assets, provided they are first used or installed by 30 June 2022. Interestingly, there no longer are write-off thresholds hence the entire cost of an asset can be claimed in the first year.
Temporary loss carry-back
Corporate tax entities with an aggregated turnover of less than $5 billion are eligible to carry-back tax losses from 2019-20, 2020-21 or 2021-22 income years to offset previously taxed profits in the 2018-19 or later income years.
This is a welcome and generous concession that will help "flatten the curve" in a post COVID world as we get into a recovery phase.
Small business tax concessions
The small business entity turnover threshold has increased from $10 million to $50 million. Businesses that fall within the expanded threshold will have access to up to 10 further small business tax concessions in three phases.
Victorian business support grants
The Victorian Government’s business support grants for SMEs will become non-assessable, non-exempt income for tax purposes.
This arrangement is extended to all states and territories, however, eligibility is restricted to future grants program announcements for SMEs facing similar circumstances to Victorian businesses.
The measures above, if used correctly, can assist Franchises in helping all their Franchisees remain financially healthy in a time of need, but also pave the way for updated business models, sound capital investments with access to the business write-offs available, to ensure the next 5 years can capitalise on the recovery post-COVID. Speak to one of our advisory partners or tax strategy consultants in your region to find out how we can help.