Millions of Australian businesses will be able to fully deduct the cost of their depreciable assets and many will receive a cash refund to help them stay afloat.
The two temporary measures are part of a $32 billion move to save companies hit hard by the COVID-19 crisis, in what Treasurer Josh Frydenberg said was "the largest set of investment incentives any Australian government has ever provided".
The policy follows similar initiatives introduced across the world that enable businesses of all sizes to claim back some tax paid pre-pandemic to offset losses incurred during the recession.Credit:
Businesses with a turnover of up to $5 billion will be able to deduct the full cost of depreciable assets of any value in the year they are purchased from now until June 30, 2022.
About 3.5 million companies – or 99 per cent of all Australian businesses – will be eligible for the tax incentive.
These same companies will be able to temporarily offset tax losses during the global pandemic against previous profits, allowing them to recoup tax paid in recent years.
The policy follows similar initiatives introduced across the world that enable businesses of all sizes to claim back some tax paid pre-pandemic to offset losses incurred during the recession.
The loss carry-back provision will help companies that were profitable before COVID-19 by allowing them to access their losses earlier by way of a cash refund. The businesses can apply tax losses incurred during 2019-20, 2020-21 and 2021-22 to offset tax paid in 2018-19 or later years.
Currently, businesses are required to carry losses forward to offset profits in future years, but the temporary change means they no longer have to do this.
Treasury estimates the two measures will create about 50,000 jobs over the next two years and deliver $31.6 billion in tax relief to businesses over the next four years.
Mr Frydenberg said the private sector needed a "kickstart" and the full asset write-off was a "game-changer".
'It will dramatically expand the productive capacity of the nation and create tens of thousands of jobs.'
"From tonight, over 99 per cent of businesses will be able to write off the full value of any eligible asset they purchase for their business," he said. "It will unlock investment. It will dramatically expand the productive capacity of the nation and create tens of thousands of jobs.
"A trucking company will be able to upgrade its fleet, a farmer will be able to purchase a new harvester and a good manufacturing business will be able to expand its production line."
Around 20,000 small to medium-sized businesses will also be able to access up to 10 tax concessions for the first time.
There will also be support for the construction industry, with an extra 10,000 first-home buyers able to purchase a new home under an extension to the home loan scheme that allows the government to guarantee up to 15 per cent of a loan.
This will allow first-home buyers to secure a loan to build a new home or purchase a newly built dwelling with a deposit of as little as 5 per cent.
The Reserve Bank expects business investment to fall 12 per cent by June 2020 and a further 5 per cent by June 2021 before recovering by 7 per cent in 2022.
A pre-budget submission from the Australian Industry Group proposed a reduction in the company tax rate to 25 per cent for companies with turnover of less than $1 billion, which is already lined up for July 2021 for businesses with turnover under $50 million.
Mr Frydenberg said COVID-19 had turned "fundamentally sound businesses into loss-making businesses".
"Through no fault of their own, millions off small and medium-sized businesses have faced lockdowns and restrictions that have severely impacted their ability to trade," he said.
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