This year with COVID-19, medical practitioners are even busier than usual. We outline the main changes introduced in the budget and what they mean for you.

Brought forward personal income tax cuts

The Government has brought forward the second stage of personal income tax cuts originally proposed to be implemented from 1 July 2022. This measure has now been legislated so the changes are effective from 1 July 2020.

The Government has announced that it will retain the Low and Middle Income Tax Offset (LMITO) for the 2021 year as a sweetener for middle income Australians. Taxpayers earning between $48,000 and $90,000 will continue to be eligible for the maximum offset of $1,080. The offset continues to be available to taxpayers with taxable incomes up to $126,000.

In addition, the Low Income Tax Offset (LITO) will increase from $445 to a maximum of $700 per person. The LITO is reduced for taxable incomes exceeding $45,000 and reduces to $0 for individuals with taxable incomes exceeding $66,667.

The changes are summarised below:

Thresholds
Rate 2019-20 2020-2021 to 2023-2024
Nil $0 – $18,200 $0 – $18,200
19% $18,201 – $37,000 $18,201 – $45,000
32.5% $37,001 – $90,000 $45,001 – $120,000
37% $90,001 – $180,000 $120,001 – $180,000
45% $180,001 + $180,001 +
Low and middle income tax offset (LMITO) Up to $1,080 Up to $1,080
Low income tax offset (LITO) Up to $445 Up to $700

 

As an illustration, these changes will result in the following reductions in annual income tax payable:

Taxable Income ($) Tax Payable
(2019-20) ($)
Tax Payable
(2020-21 to 2023-24) ($)
Net Tax Saving ($)
50,000 7,797 6,717 1,080
100,000 24,497 22,967 1,530
150,000 42,997 40,567 2,430
200,000 63,097 60,667 2,430

*This does not include the Medicare Levy (which remains unchanged at 2% of taxable income), as well as any applicable tax offsets.

The proposed Stage 3 tax cuts remain unchanged and are expected to commence from 2024-25.

Immediate write-off and accelerated depreciation for business

Whilst the Government only recently expanded the instant asset write-off to 31 December 2020, a brand new “immediate expensing” of the full cost of eligible capital assets will be available from 7.30pm on 6 October 2020 until 30 June 2022. This concession will apply to all businesses with aggregated turnover not exceeding $5 billion.

Under the existing instant-asset write off, businesses with aggregated turnovers not exceeding $500 million can immediately write off the value of assets acquired with costs below the threshold (i.e. $150,000). In addition, these businesses may claim a 50% immediate deduction for assets costing above the threshold (or pooled for small businesses entities).

With the new measures now legislated, eligible businesses will be able to claim a deduction for the costs of new assets (and improvements to existing assets) used or installed between 6 October 2020 and 30 June 2022.

As the depreciation rules have been altered several times in recent years, we have summarised the who, what, when and how for this concession below:

* Businesses that hold assets eligible for the $150,000 instant asset write-off will have an additional six months (until 30 June 2021) to install or use those assets.

Small business entities with aggregated turnovers less than $10 million will be able to deduct the entire balance of their simplified depreciation pools for years ending while the immediate expensing is in effect.
We expect that passenger cars will continue to be subject to the depreciation limit.
Where an immediate deduction is not available under the new rules, the existing rules may still apply.

Other 2020 measures

The following items have a broader relevance to medical practitioners and it is important to be aware of them:

  • Medical businesses may be able to access the JobMaker plan, where employers will receive a credit over 12 months from 7 October 2020 for new jobs created for eligible employees. A credit of $200 per week is available for hiring an employee aged 16 to 29, or $100 per week for hiring an eligible employee aged 30 to 35. The employee needs to work a minimum of 20 hours per week and received JobSeeker, Youth Allowance or Parenting Payment for at least 1 month out of the 3 months prior to when they are hired by the employer.
  • The Government is investing $4.9 billion towards health to ensure Australian receive medical care throughout the pandemic.

Contact Pilot

If you would like to discuss any of the tax changes announced in the budget, please contact Kristy Baxter or Janelle Kiernan from our medical team on (07) 3023 1300.