Key takeaways:
- Loss carry back is reintroduced, allowing eligible companies to offset current year losses against prior year tax paid and receive a refundable tax offset.
- Electric vehicle tax concessions are being pared back.
- From 1 July 2027, SME’s can opt into monthly PAYG instalments.
- The $20,000 instant asset write-off for small businesses with turnover up to $10 million has been made permanent.
- Revenue and gross asset thresholds for large proprietary company classification doubled.
Reintroduction of the loss carry back rules
The Government will reintroduce the loss carry back regime, allowing eligible companies to carry back current year revenue tax losses for up to two prior income years.
These losses may be offset against previously paid company income tax, generating a refundable tax offset.
Access to the refund will be limited by the company’s franking account balance, aligning refunds with previously paid tax.
This measure is intended to:
- improve short term liquidity during investment phases or temporary downturns
- support innovation and growth within businesses
- provide cash flow support for small and medium sized companies
Changes to FBT exemption for electric vehicles
Since 1 July 2022, a Fringe Benefit Tax (FBT) exemption has applied to eligible zero or low emissions vehicles provided by employers for the private use of employees.
The Government has announced phased changes to the FBT exemption for eligible EVs, narrowing the concession from 1 April 2027 and replacing the full FBT exemption with a reduced statutory formula percentage, reduced from 20% to 15%, from 1 April 2029.
The key changes are:
- The current FBT exemption for eligible EVs will remain until 31 March 2027.
- From 1 April 2027 to 1 April 2029
- The full FBT exemption will apply only to EVs costing $75,000 or less.
- EVs above $75,000 but below the luxury car tax (LCT) threshold will be able to apply the reduced statutory formula percentage of 15%.
- From 1 April 2029, all EVs below the LCT threshold will be eligible to apply the reduced statutory formula percentage of 15%.
- The Government has stated that existing leases will not be impacted by the changes.
- Plug-in hybrid electric vehicles (PHEVs) are excluded from new exemptions from 1 April 2025.
- Import tariff exemptions for eligible EVs will continue indefinitely.
PAYG flexibility for small and medium businesses
Effective 1 July 2027, small and medium businesses will be able to opt into monthly reporting and payment of PAYG instalments.
Small and medium businesses will also be able to access the ATO’s dynamic instalments pilot, to assist in calculating and varying their PAYG instalments more easily.
This initiative is designed to help businesses by ensuring that tax instalments more closely reflect their real-time business activity.
Audit relief for businesses
As part of measures to reduce regulatory burden in the financial sector, the Government is proposing to double the revenue and gross asset thresholds that determine whether a proprietary company is classified as large under the Corporations Act. The proposed changes would increase the thresholds from $50 million to $100 million for consolidated revenue, and from $25 million to $50 million for consolidated gross assets. The employee threshold remains at 100 or more. Companies falling below the new thresholds would be reclassified as ‘small’ and would generally no longer be required to lodge an annual audited financial report, directors’ report and sustainability report with ASIC.
The Government is also proposing changes to simplify climate-related financial disclosures and group reporting requirements. On climate reporting, the Government will consult on reforms to reduce compliance burden while retaining core sustainability reporting obligations. This includes clarifying how key concepts such as “undue cost or effort” apply in practice, ensuring assurance requirements are proportionate, and setting clearer limits on supplier information requests to reduce costs for small businesses.
Additionally, the Government proposes to simplify the reporting relief process for entities within corporate groups by replacing the current requirement to enter into complex deeds of cross guarantee with a streamlined statutory process, without reducing protections for those dealing with group companies.
Permanent extension to small business instant asset write-off
The Government has announced that the $20,000 instant asset write-off for small businesses will be permanently extended.
Small businesses with turnover up to $10 million will be able to immediately deduct eligible assets costing less than $20,000.
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