FEDERAL BUDGET 2021

Snap-shot of Federal Budget 2021-22

14 May 2021 

Extension of temporary full expensing measures

The temporary full expensing measures (announced in the 2020-21 Federal Budget) will be extended for another 12 months to 30 June 2023, to encourage further investment in a bid to support economic recovery in 2022-23.

From 6 October 2020, the instant asset write-off was expanded to apply to businesses with aggregated annual turnover of less than $5 billion. The measure will be extended and will apply to all new assets of any value, acquired between 7:30PM AEDT on 6 October 2020 and 30 June 2023.

The cost of these new assets can be written off in full in the year that the asset is first used or installed ready for use, in a business.

For those businesses with an aggregated turnover of less than $50 million, the measure also applies to second hand assets.

Loss carry-back

The Government has announced that it will extend the existing loss carry-back rules which were introduced as part of last year’s federal budget.

The scheme is intended to further support Australia’s economic recovery and business investment and will allow companies with aggregated turnover of less than $5 billion to carry back tax losses from the 2022-23 income year to offset previously taxed profits as far back as the 2018-19 year.

The scheme allows companies to carry back losses incurred in the current year to earlier years in which they had income tax liabilities. The benefit is a refundable tax offset which represents the tax that the eligible entity would save if it were to deduct the loss in a previous income year.

The offset is limited by the company’s income tax liability in the relevant profit year, and the franking account balance at the end of the year in which the entity claims the loss carry back tax offset.

The measure will interact with the temporary full expensing, also introduced under last year’s federal budget and extended in this budget, to allow companies to generate tax losses which may then be carried back to generate cash refunds for businesses who are eligible to apply the rules.

Tax depreciation of intangible assets

The Government has announced that it will allow taxpayers to self-assess the effective life of certain intangible assets, such as patents, registered designs, copyrights and in-house software. The aim is to encourage invest and hiring in research and development.

Under the current law, these intangibles have prescribed tax effective lives ranging from 20 years for standard patents, to five years for in-house software (such as website development).

Under the proposed measure, taxpayers will have the choice to use a more appropriate effective life for these intangible assets taking into account the economic benefits provided by the asset.

These measures will apply to assets acquired from 1 July 2023 (after the temporary full expensing regime has concluded).

Certain intangible assets, such as trademarks and goodwill, are not depreciable assets for tax purposes and are excluded from this measure.

Boosting apprenticeships through wage subsidies

The Government has announced that it will provide an additional $2.7 billion over four years from 2020-21 to expand wage subsidies for qualifying apprenticeships.

The measures will uncap the number of eligible places and increase the duration of the subsidy to 50% of wages paid to apprentices or trainees for 12 months from the date they commence employment, up to a maximum of $7,000 per quarter.

The subsidy originally applied to apprentices employed between 5 October 2020 and 30 September 2021. The end date has now been extended to 31 March 2022.

The Government will also provide 5,000 additional places and in-training support services to encourage and support women commencing in non-traditional trade occupations.

1. Invest in capital assets

Look at your planned capital expenditure.

If your business needs to buy new plant and equipment, then doing so between now and 30 June 2023 will deliver you an upfront tax deduction for the full cost of the eligible items.  You can also apply this instant write-off to second-hand assets that your business purchases, but only if your turnover is less than $50 million.

From 1 July 2023, normal depreciation arrangements will apply, with the exception of eligible intangible assets such as patents, designs and software which may be depreciated much quicker.

2. Utilise incentives to increase employment

See if one of the announced incentives will reduce the cost of taking on new employees.

The decision for your business to take on more apprentices may’ve been made easier by an increase in subsidies and support.

If your business operates in the digital industry, a combination of investment incentives, digital infrastructure spend and skills spending might provide benefits for your business.

3. Take some breathing space to get back on your feet

Giving your business some time and space to get back on its feet was a key theme for SMEs in the 2022 Budget.

Measures that may apply to you include:

• Financial incentives if you operate in the certain industries.

• The ability to ask the Administrative Appeals Tribunal to pause or modify ATO debt recovery action if you are in a tax dispute with the ATO.

• Increased ability to access Government supported loans through the SME Recovery Loan Scheme.

• Improvements to Australia’s insolvency rules which will increase thresholds for creditors to issue statutory demands, simplify insolvency arrangements where you operate through a trust, and improve the insolvent trading safe harbour provisions.

• Let you potentially claim refunds of tax paid in prior years where you have current year losses, by expanding access to the loss carry back regime.

4. Value the women in your business

The suite of measures totalling $3.4 billion as part of the Government’s “Women’s Budget Statement” are designed to have a positive flow on effect for the whole economy.

With a $1.7 billion investment in improving affordability of childcare, the Federal Budget aims to increase workforce participation, in particular for women.

The Government’s plan to remove the $450 threshold for Superannuation Guarantee payments means that employees will start to receive super from the first $1 earned, with women expected to benefit most.

5. Benefit from the 25% company tax rate

Small to medium sized trading companies (with a turnover of less than $50 million) shouldn’t forget the reduced company tax rate cut that kicks in from 1 July 2021.

25% will become your new company tax rate payable on profits, but it will also become your new franking rate for dividends you pay. You should consider whether to pay dividends this year, or bring forward expenses, to get a better tax outcome.

Contact Me or My Team today for more information.

Disclaimer 
The material in this communique is for the benefit and information of clients. The items are in the nature of general comments only, and are not to be used, relied or acted upon without seeking further professional advice. Quantum Business Finance accepts no liability for any errors or omissions, or for any loss or damage suffered as a result of any person acting without such advice.