The Treasury Laws Amendment (A Tax Plan for the COVID-19 Economic Recovery) Bill 2020 received Royal Assent on 14 October 2020 as Act No 92 of 2020. It implements several tax announcements from the 2020 Federal Budget.

Importantly, the Act brings the personal tax cuts (Stage 2) forward to 1 July 2020. From that date, the top threshold of the 19% personal income tax bracket is increased from $37,000 to $45,000. The top threshold of the 32.5% tax bracket is increased from $90,000 to $120,000. The Act also brings forward to 2020–2021 the increase in the low income tax offset (up to $700). The low and middle income tax offset (up to $1,080) is retained for 2020–2021.

It also expands a range of tax concessions currently available to small businesses (turnover under $10 million) to be made available to medium sized businesses (turnover $10 million to $50 million). Businesses with turnover less than $5 billion are also able to deduct the full cost of eligible depreciating assets that are installed ready for use between 6 October 2020 and 30 June 2022.

Implement new PAYG withholding rates by 16 November

The ATO issued updated tax withholding schedules on 13 October 2020 to reflect the 2020–2021 income year personal tax cuts. The ATO acknowledges that, as the changes to withholding were been made partway through the income year, employers were unable to immediately implement them in their payroll. However, employers must make sure they are withholding the correct amount from salary or wages paid to employees for any pay runs processed in their systems from no later than 16 November onwards.

Employees and other payees will receive their entitlement to the reduced tax payable for the entire 2020–2021 income year when they lodge their income tax returns for that period (on the basis of their full-year taxable income).

Tables that continue to apply unchanged from 13 October 2020 include those relating to:

  • study and training support loans;
  • return to work payments;
  • payments made under voluntary agreements; and
  • an agreement to increase withholding.

There are also separate tables for the Seasonal Worker and Pacific Labour Scheme.