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.
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.
The Government intends to clarify the treatment of trusts with corporate trustees under Australia’s insolvency law. Many small businesses are established and operate as trading trusts. When these entities face financial distress, the process of unravelling the companies and trusts in the structure is extremely complicated, which naturally drives up the cost of the liquidation process, diminishing returns to creditors.
There are also plans for improvement to schemes of arrangement processes to better support businesses, including by introducing a moratorium on creditor enforcement while schemes are being negotiated.
The Government will also increase the minimum threshold at which creditors can issue a statutory demand on a company from $2,000 to $4,000.
The Government will commence an independent review of the insolvent trading safe harbour. The Safe Harbour rules enable competent directors to work to save their businesses without fear of personal liability. These rules can be very effective to save businesses and preserve jobs. However, the Safe Harbour legislation is unfortunately still not widely understood by directors, many of whom do not obtain independent advice from a qualified advisor early enough to enable them to benefit from the Safe Harbour rules.
Employee Share Scheme Changes
The Government has announced changes to the taxation and regulation of Employee Share Scheme (ESS) interests. These changes are intended to assist Australian companies with engaging and retaining talent in order to remain competitive in the global market.
Currently, where an employee is provided with an ESS interest that meets certain eligibility requirements, the employee can defer the tax on the ESS interest until the earliest of the following points in time:
- Cessation of employment
- The removal of any risk of forfeiture and restrictions on disposal, and
- 15 years from the date the ESS are issued.
The Government is proposing to remove the cessation of employment as a taxing point.
The Government is also proposing to remove regulatory requirements relating to disclosure documents required under the Corporations Act for employers who provide ESS interests where:
- The employer is not charging, or lending to the employees to whom the ESS is offered, or
- Where the ESS offers are valued at less than $30,000 a year per employee.
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.
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.
COVID-19 response package
The Government has announced that it will provide significant financial support towards various sectors that were particularly affected by COVID-19, being the arts, aviation and tourism sectors.
In FY21-22, $168m will be provided to support the arts sector, supporting events and productions, local film and television production, independent cinemas, community museums, galleries and historical societies, musicians and national performing arts.
It was previously announced that the Producer Tax Offset, being a refundable tax offset for Australian expenditure in making films, would be reduced from 40% of expenditure on feature films, to 30%. This proposed decrease will not go ahead, with the Government announcing that the 40% rate will be retained.
Aviation and tourism
The aviation and tourism sectors will also be assisted with further COVID-19 support, with a total of $4.5 billion of Government support being provided to these sectors over four years from 2020-21.
This includes the subsidy of domestic airfares to tourism regions, and extending support to maintain connectivity on major domestic and regional air routes, and maintain international aircraft and flight crews in preparation for the return of international travel.
Financial support will also be provided for training and accreditation requirements for ground handling staff to preserve skills, and to maintain critical air navigation, traffic control, meteorological services, and aviation fire and rescue services at major Australian airports.
The Government has also announced that it will extend additional support to Australian zoos, aquariums, the Great Barrier Reef Marine Park Authority.
Payment Times Reporting
The Payment Times Reporting Scheme came into effect on 1 January 2021 and currently requires “large businesses” to report on their payment times to small businesses bi-annually. Large businesses include those that have an annual total income of more than $100 million.
Businesses who are subject to Payment Times Reporting must report the shortest and longest standard payment periods offered, and the proportion of their small businesses suppliers who are paid within certain ranges of time (e.g. within 30 days). Businesses may be subject to a civil penalty of up to $66,600 per day for each report they fail to lodge by the required due date.
As part of its commitment to supporting small businesses overcome the challenges resulting from Covid-19, the Government has announced that it will provide additional funding of $16.0 million over four years to ensure the effective operation of the Payment Times Reporting Scheme. This measure is intended to assist with improving cash flows by discouraging long payment terms.