This year’s Federal Budget, the Government’s policy priorities—and the proposed measures announced to help achieve these priorities—centre on delivering on a plan to strengthen the future for all Australians by:
- building a stronger and more productive economy to create more jobs,
- addressing the cost of living pressures and managing current challenges,
- strengthening our regions and critical infrastructure,
- guaranteeing essential services, and
- protecting our interests.
Supporting small businesses to adopt digital technology and train and up skill employees with new tax incentives.
There are deduction boosts for small business: skills and training and digital adoption.
The Federal budget has two support measures for small businesses (those with an aggregated annual turnover less than $50million) for expenditure incurred on external training courses and digital technology in a 20% uplift of the amount deductible.
External training courses
If the business is eligible the training course has to be delivered by entities registered in Australia and must be provided to employees in Australia or online. Some exclusions will apply, such as for in-house or on-the-job training.
The boost will only apply to eligible expenditure incurred from 7:30 pm (AEDT) on 29 March 2022 until 30 June2024. The boost for eligible expenditure incurred by 30 June 2022 will be claimed in tax returns for the following income year. The boost for eligible expenditure incurred between 1 July 2022 and 30 June 2024, will be included in the income year in which the expenditure is incurred.
If the business is eligible business expenses and depreciating assets that support its digital adoption, such as portable payment devices, cyber security systems or subscriptions to cloud-based services are deductible. An annual cap applies in each qualifying income year so that expenditure up to $100,000 will be eligible for the boost. The boost will apply to eligible expenditure incurred from 7:30 pm (AEDT) on29 March 2022 until 30 June 2023.
The boost for eligible expenditure incurred by 30 June 2022 can be claimed in tax returns for the following income year.The boost for eligible expenditure incurred between 1 July 2022 and 30 June2023 can be included in the income year in which the expenditure is incurred.
PAYG instalments: option to base on financial performance
The Budget papers confirm the TreasurerJosh Frydenberg’s earlier announcement that companies will be allowed to choose to have their PAYG instalments calculated based on current financial performance, extracted from business accounting software (with some tax adjustments).
The Government will consult with affected stakeholders, tax practitioners and digital service providers to finalise the policy scope, design and specifications of this measure.
Subject to advice from software providers about their capacity to deliver, it is anticipated that systems will be in place by 31 December 2023, with the measure to commence on 1 January 2024, for application to periods starting on or after that date.
PAYG and GST instalment uplift factor
The Budget papers confirm the Treasurer’s earlier announcement that the GDP uplift factor for PAYG and GST instalments will be set at 2% for the 2022–2023 income year. The papers state that this uplift factor is lower than the 10% that would have applied under the statutory formula.
The 2% GDP uplift rate will apply to small to medium enterprises eligible to use the relevant instalment methods (up to$10 million annual aggregated turnover for GST instalments and $50 million annual aggregated turnover for PAYG instalments) in respect of instalments that relate to the 2022–2023 income year and fall due after the enabling legislation receives assent.
More COVID-19 business grants designated NANE income
The Government has extended the measure which enables payments from certain state and territory COVID-19 business support programs to be made non-assessable, non-exempt (NANE) income for income tax purposes until 30 June 2022. This measure was originally announced on 13September 2020.
Consistent with this, the Government has made the following state and territory grant programs eligible for this treatment since the 2021–2022 Mid-Year Economic and Fiscal Outlook:
- New South Wales AccommodationSupport Grant
- New South Wales CommercialLandlord Hardship Grant
- New South Wales Performing ArtsRelaunch Package
- New South Wales FestivalRelaunch Package
- New South Wales 2022 SmallBusiness Support Program
- Queensland 2021 COVID-19Business Support Grant
- South Australia COVID-19Tourism and Hospitality Support Grant
- South Australia COVID-19Business Hardship Grant.
The changes are part of an ongoing series of announcements which will continue to have effect until 30 June 2022.
COVID‑19 ResponsePackage – tax deductibility of COVID‑19 test expenses
The Government will ensure that the costs of taking a COVID‑19 test to attend a place of work are tax deductible for individuals from 1 July 2021. In making these costs tax deductible, the Government will also ensure fringe benefits tax (FBT) will not be incurred by businesses where COVID‑19 tests are provided to employees for this purpose.
Patent box income extended
The concessional tax treatment for eligible corporate income associated with new patents in the medical and biotechnology sectors will be extended to corporate taxpayers who commercialise their: (i)eligible patents linked to agricultural and veterinary chemical products; and(ii) patented technologies which have the potential to lower emissions.
The Government will expand the patent box, announced in the 2021‑22 Budget and currently before Parliament, to support practical, technology‑focused innovations in the Australian agricultural sector.
The Government will provide concessional tax treatment for corporate taxpayers who commercialise their eligible patents linked to agricultural and veterinary (agvet) chemical products listed on theAustralian Pesticides and Veterinary Medicines Authority (APVMA), PubCRIS(Public Chemicals Registration Information System) register, or eligible PlantBreeder’s Rights (PBRs).
Eligible corporate income will be subject to an effective income tax rate of 17 per cent for PBRs and patents granted or issued after 29 March 2022 and for income years starting on or after1 July 2023. Eligible income will be taxed at the concessional tax rate to the extent that the research and development of the innovation took place in Australia.
The expanded patent box will provide concessional tax treatment for corporate taxpayers who commercialise their patented technologies which have the potential to lower emissions.
Eligible corporate income will be subject to an effective income tax rate of 17 per cent, for patents granted after29 March 2022 and for income years starting on or after1 July 2023.
Eligible income will be taxed at the concessional tax rate to the extent that the research and development of the innovation took place in Australia.
The Government will consult with industry before settling the detailed design of the patent box expansion to agriculture and low emissions technology.
Patent Box – tax concession forAustralian medical and biotechnology innovations: updated policy specifications
The Government will now allow patents granted or issued after 11 May 2021 to be eligible for the regime.This will incentivise further research and development (R&D) to be undertaken in Australia on medical and biotechnology patents, much of which occurs after the patent application.
The Government will also now allow standard patents granted by IP Australia, utility patents issued by the United StatesPatent and Trademark Office (USPTO), and European patents granted under theEuropean Patent Convention (EPC) to be eligible. This will remove regulatory barriers to accessing the patent box regime for Australian developed innovations patented in the major overseas jurisdictions with equivalent patent regimes. However, taxpayers will still only benefit from the concessional tax treatment under the patent box to the extent that the R&D occurred inAustralia.
Employee share schemes (ESS)
For company law purposes, the investment thresholds for unlisted companies will be changed so that ESS participants can invest up to $30,000 per participant per year (accruable for unexercised options for up to five years), plus 70 per cent of dividends and cash bonuses.
TheGovernment will expand access to employee share schemes and further reduce red tape so that employees at all levels can directly share in the business growth they help to generate.
Where employers make larger offers in connection with employee share schemes in unlisted companies, participants can invest up to:
- $30,000 per participant per year, accruable for unexercised options for up to 5 years, plus 70 per cent of dividends and cash bonuses; or
- any amount, if it would allow them to immediately take advantage of a planned sale or listing of the company to sell their purchased interests at a profit.
The Government will also remove regulatory requirements for offers to independent contractors, where they do not have to pay for interests.
Carbon credit and biodiversity certificate income
The proceeds from the sale of Australian Carbon Credit Units (ACCUs) and biodiversity certificates generated from on-farm activities will be treated as primary production income for the purposes of the Farm Management Deposits(FMD) scheme and the tax averaging provisions from 1 July 2022.
The Government will allow the proceeds from the sale of Australian Carbon Credit Units (ACCUs) and biodiversity certificates generated from on‑farm activities to be treated as primary production income for the purposes of the Farm Management Deposits (FMD) scheme and tax averaging from 1 July 2022. The Government will also change the taxing point of ACCUs for eligible primary producers to the year when they are sold, and extend similar treatment to biodiversity certificates issued under the Agriculture Biodiversity Stewardship Market scheme, from1 July 2022. Eligible primary producers are those who are currently eligible for the FMD scheme and tax averaging.
These changes will encourage more primary producers in regional and remote areas to undertake additional carbon abatement and biodiversity stewardship activities.
TAX COMPLIANCE AND INTEGRITY
Digitalising trust income reporting
The Budget confirms the federal Government’s previously announced intention to digitalise trust and beneficiary income reporting and processing. It will allow all trust tax return filers the option to lodge income tax returns electronically, increasing pre-filling and automating ATO assurance processes.
The measure will commence from 1 July 2024– “subject to advice from software providers about their capacity to deliver”. The Government will consult with affected stakeholders, tax practitioners and digital service providers to finalise the policy scope, design and specifications.
Taxable payments data reporting: option to link to BAS cycle
Businesses will be provided with the option to report taxable payments reporting system data on the same lodgment cycle as their activity statements, via accounting software.
The rules for the taxable payments reporting system are contained in Sub div 396-B of Sch 1 to the TaxationAdministration Act 1953.
The Government will consult with affected stakeholders, tax practitioners and digital service providers to finalise the policy scope, design and specifications of the measure.
Subject to advice from software providers about their capacity to deliver, it is anticipated that systems will be in place by 31 December 2023, with the measure to commence on 1 January 2024.
Want to know more?
To find out more about how the federal budget can impact your business decisions in the next financial year or how you take advantage of the latest policy changes, you can check out the federal budget documents here, or alternatively for information that pertains to your unique needs chat to us , or phone us on (08)9217 2400