News & Insights

The Federal Government’s 2020 Budget is set to provide much-needed assistance for franchises and small businesses. The Budget primarily focuses on job creation to aid the Australian economy’s recovery from the devastating blow of the COVID-19 pandemic and the recent bushfires, floods and drought.

The key measures coming out of the Budget that will benefit the franchising sector includes:

• $15 billion in JobKeeper payments;
• Small business tax concessions;
• $26.7 billion in instant asset write-offs for business (uncapped);
• $1.9 billion for loss carry-back tax provision;
• $552.9 million in measures to support regional Australia;
• $1.2 billion extending wage subsidies for apprentices and trainees; and
• $850 million on JobMaker hiring credit payable for up to 12 months to employers hiring young people between the ages of 16 and 35.

Specifically, the below measures are of particular benefit for franchise businesses.

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. Importantly, the Budget has removed write-off thresholds so the full 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 the 2019-20, 2020-21 or 2021-22 income years to offset previously taxed profits in the 2018-19 or later income years.

small business tax concessions

Small business tax concessions will be available to more businesses with the small business entity turnover threshold increasing 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.

how franchisors and franchisees benefit from the budget

The franchising sector has been significantly impacted by the COVID-19 pandemic as well as the array of natural disasters over the last year.

The Budget works towards stabilising the economy and assisting the growth of small and medium businesses who have been significantly affected.

The measures detailed above will support SMEs to recover from the economic downturn.  In particular, the Budget enables franchisors to stabilise and better support the franchise network, and ensures franchisees remain fiscally healthy so they can continue operating their business.

The information contained in this article is general in nature and cannot be relied on as legal advice nor does it create an engagement. Please contact one of our lawyers listed above for advice about your specific situation.