Federal Budget 2021-22: Focus on Tax

Support for Australia’s businesses and our personal finances was at the heart of this year’s Federal Budget as the Morrison Government continues its attempts to strengthen the post-lockdown economy.

Once again Treasurer Josh Frydenberg made tax measures a key part of his Budget speech, announcing extensions to several of the Government’s signature tax support measures, together with new tax incentives and funding for job training and skills. These measures are designed to boost the continuing recovery of small and family businesses, which the Treasurer called the “engine room of the economy”.

LMITO extended again

With a federal election due next year, a key Budget announcement was another one year extension to the low and middle income tax offset (LMITO) for 2021-22. This measure will provide a tax offset of up to $1,080 for individuals and $2,160 for dual income families.

Continuation of full expensing and loss carry-back

The temporary full expensing and loss carry-back measures announced last year are also being extended to help businesses bring forward investment and access tax benefits. Eligible businesses with an aggregate annual turnover of up to $5 billion will be able to deduct the full cost of eligible depreciable assets until 30 June 2023.

Eligible companies can also carry-back tax losses incurred up until 30 June 2023 to offset previously taxed profits as far back as 2018-19. This tax refund will be available when companies lodge their tax returns for the 2020-21, 2021-22 and 2022-23 financial years.

Patent box

To provide incentive for Australia’s medical and biotechnology companies to commercialise their research, the Government is introducing a new ‘patent box’ from 1 July 2022. Income from patents will be taxed at a concessional rate of 17 per cent, which is significantly lower than the normal 30 per cent corporate rate. The new tax incentive is designed to encourage locally-based R&D and may be extended to the clean energy sector.

Adopting digital technology

As the digital economy continues to change the way we do business, small businesses will be supported to adopt digital technologies through a $12.7 million expansion of the Digital Solutions – Australian Small Business Advisory Service. They will also benefit from further $15.3 million in funding to help with the introduction of e-invoicing.

Employee share schemes reintroduced

To help businesses attract and retain talent, the Budget removes the cessation of employment taxing point for tax-deferred employee share schemes. This means tax on shares received as part of these schemes can now be deferred for up to 15 years.

New apprenticeship funding

The Government announced an additional $2.7 billion in funding for apprenticeships and traineeships. Businesses will be paid a 50 per cent wage subsidy over 12 months for new apprentices or trainees signed up by 31 March 2022.

There will also be an additional $500 million for low-fee or no cost training through the existing JobTrainer program to support training in digital skills and upskilling in industries like aged care.

New tax umpire

The Government is also making it easier for small businesses to pause or modify the collection of debts under dispute with the ATO. They will be able to apply to the Small Business Taxation Division of the Administrative Appeals Tribunal to have an ATO debt recovery action paused until their case is decided.

Removal of SG threshold

Small businesses with low-income or part-time employees will need to revisit their Superannuation Guarantee (SG) contributions. This follows the Government’s commitment to remove the current $450 per month threshold before an employer needs to start making SG contributions for an employee.

Tax cut for brewers and distillers

And finally, it’s cheers all round for our artisan brewers and distillers. From 1 July 2021, those eligible will receive full remission (up from 60 per cent) of any excise paid on alcohol produced up to the new $350,000 cap on the Excise Refund Scheme.

If you have any questions about how the proposed changes will impact you or your business, please contact your tax advisor at our office on 1300 363 866.

Status of changes

The information set out above is based on the data and budget information announced by the Commonwealth of Australia concerning the proposed 2021 – 2022 Commonwealth Budget. Please note that although the changes outlined above have been proposed by the Government, the proposed legislative changes that are necessary to implement the proposed Budget are not yet finalised and may be subject to change as the relevant legislation implementing the changes proposed by the Budget passes through parliament. The above summary is intended as general information only and is not intended to constitute taxation or financial/superannuation planning advice. The application of many laws, including taxation laws, are dependent upon an individual’s personal circumstances. You should, therefore, not make any investment or other financial decisions in reliance upon the information set out in this correspondence and should seek professional advice on the financial, legal and taxation implications before making any such decisions.