The Treasurer presented the Australian Federal Budget for 2021 and as anticipated there are a number of announcements of particular interest for business owners.
1. Outright Deduction of Capital Assets until 30 June 2022
In the 2020 Budget it was announced that businesses with an aggregated turnover of less than $5 billion would be able to deduct the full cost of eligible capital assets acquired from 7:30pm on 6 October 2020 and first used or installed ready for use by 30 June 2022. This measure has now been extended until 30 June 2023.
As in previous announcements full expensing (instant write off) applies in the first year of use, for all new depreciable assets, the cost of improvements to existing eligible assets and, for small and medium sized businesses, second-hand assets.
2. Temporary Loss Carry Back for Eligible Companies
An additional announcement in the 2020 budget was the measure allowing companies with a turnover of less than $5 billion to carry back losses from the 2020, 2021 or 2022 income years to offset previously taxed profits made in or after the 2019 income year. This measure has been extended to include the 2023 year.
This allows companies to generate a refundable tax offset in the year in which the loss is made. The tax refund is limited by requiring that the amount carried back is not more than the earlier taxed profits and that the carry back does not generate a franking account deficit.
Companies that do not elect to carry back losses under this measure can still carry losses forward as normal.
3. Superannuation Guarantee Eligibility
Previously employees earning less than $450 per month have been exempt from the requirement to have the superannuation guarantee contributions (9.5% currently) paid on their behalf. This minimum income threshold has been removed effective from the financial year after the legislation requires Royal Assent. It is expected it will apply from 1 July 2022. We will keep you updated on the start date when confirmed.
4. Tax Treatment of qualifying storm and flood grants
Income Tax exemptions will be provided for qualifying grants made to primary producers and small businesses on the basis they have been affected by storms and flood activity. This exemption covers recovery grants that relate to the storms and floods between 19 February 2021 and 31 March 2021.
5. Other measures
There were a range of other announcements that are applicable to specified industries. If you wish to enquire about any of the following please contact our office:
- Concessional corporate tax rate for medical and biotech patents income
- Government Digital Economy Strategy including the Digital Games Offset
- Intangible assets depreciation: the option to self-assess their effective/useful life.
- Small craft brewers and distillers increase in ability to claim a refund of excise.