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TAX UPDATES
2022 TAX UPDATES
Temporary Full Expensing of Depreciation Assets
The majority of businesses are eligible to claim an outright deduction for the cost and installation of new assets. To qualify for full expensing, the asset must be first held and first used, or installed ready for use, between 7:30pm AEDT 6 October 2020 and 30 June 2022. Unlike prior rules on instant asset write-offs, no limit applies to the cost of an asset under the full expensing rules. That is, an asset of any value may be fully deducted in the appropriate income year. For a business to qualify for the outright deduction, the entity must have an aggregated turnover of less than $5 billion. Since the legislation has been enacted, further amendments will be made to the laws to allow businesses a choice in using full expensing or not. In certain situations, it may be beneficial to spread out tax deductions over multiple years. Also, certain large entities will have separate eligibility criteria.
Announcement (6-Oct-2020) Consultation (6-Oct-2020) Intoduced (7-Oct-2020) Passed (9-Oct-2020) Royal Assent (14-Oct-2020 Date of effect (6-Oct-2020)
Businesses with less than $500 million in aggregated turnover can accelerate depreciation deductions for new assets in the 2019-20 and 2020-21 income years. Accelerated depreciation rules for these entities have subsequently been superseded by new ‘temporary full expensing’ legislation in November 2020. However, the option to use accelerated depreciation continues. Accelerated depreciation is available for assets in the first year the asset would ordinarily claim a deduction. In the first year a deduction is allowable for 50% of the installed cost of the asset plus regular depreciation rates for the remainder. The Backing Business Investment measures are in concert with the extension of the instant asset write-off. However, it may only be relevant for some clients until 6 October 2020, when the full expensing regime commenced. Small businesses using pooling can use a 57.5% write-off for assets purchased after 12 March 2020 that do not qualify for immediate write-off in the 2019-20 income year. Small business entities are also covered by the new full expensing legislation.
Announced: 11-Mar-2020 Updated: 7-Dec-2020
Instant Asset Write-off - COVID-19 Tax Stimulus Package
The instant asset write-off will be available for the majority of businesses during some part of the 201920 and 2020-21 income years. For purchases between 12 March 2020 and 6 October 2020, businesses under $500 million in turnover can get an immediate tax deduction for assets costing less than $150,000. In the purchasing time frame, the asset needs to be first used or installed ready for use by 30 June 2021. In the legislation, the update also extends to the low value pool for the 2019-20 income year. An entity with a small business pool balance of less than $150,000 will be able to write off the entire balance (up from $30,000). For the 2020/21 income year, general small business depreciation pools may be written off in full in accordance with the full expensing rules. The government stimulus package, announced to prevent a large national economic downturn, includes this boost to instant asset write-offs. However, the stimulus will not be received until lodgment of the tax return. Subsequent legislation introduced into parliament will allow businesses an option of using the instant asset write-offs or to depreciate new assets over their effective life.
Announced: 11-Mar-2020 Updated: 7-Dec-2020
Payment Times Reporting Scheme
The Payment times reporting scheme is commencing 1 January 2021, providing small businesses with greater understanding of the corporate treasury management processes within large business. In the publicly available report, information about how quickly a big business pays a small business for goods and services is delivered. This can provide a small business a snapshot regarding how quickly they could expect payment for work with a big business, which may help decision making. Small businesses also will have the option of opting out from the reporting scheme. This will mean that their identify as a small business will remain unknown to a big business throughout the relationship.
Announcement (10-Oct-2020) Intoduced (13-May-2020) Passed (6-Oct-2020) Royal Assent (14-Oct-2020 Date of effect (1-Jan-2021)
2022 TAX UPDATES
Corporate Residency Test to Change for Foreign Companies
A ‘significant economic connection to Australia’ test is a rule proposed to be added to Australian tax residency for foreign incorporated companies. Announced in the 2020 federal budget, this measure draws on a key recommendation of a Board of Taxation report into corporate residency. The new test will be applied to foreign incorporated companies prior to determining the central management and control test. As part of the announcement, foreign incorporated companies will be required to pass both tests to have their worldwide income taxed in Australia.
Announcement (6-Oct-2020) Consultation (6-Oct-2020) Introduced Passed Royal Assent Date of effect
Small Business Entity Threshold to Increase
Many more businesses will be eligible to access income tax concessions with the passing of legislation which extends thresholds currently reserved for small businesses. These concessions include:
• immediate deduction of certain start-up and prepaid expenses • exemption from FBT for car parking and work-related portable devices provided to employees • access to simplified trading stock rules • access to PAYG instalments based on GDP-adjusted notional tax • settle excise and excise-equivalent customs duties monthly, and • businesses will have a two-year amendment period to apply to income tax assessments for income years starting from 1 July 2021, excluding entities that have significant international tax dealings or particularly complex affairs.
A business will be eligible to access these concessions if their aggregated turnover is less than $50 million. Mostly, the change in aggregated turnover threshold will take place from 1 July 2021, with different dates to line up with the FBT year. Also, the eligible entity can access the simplified accounting method determination for GST purposes from 1 July 2021.
WA COVID-19 Stimulus Package
A range of stimulus measures are being implemented in Western Australia to assist business with cash flow issues resulting from COVID-19. In particular, certain businesses in WA will receive grants, while others will be allowed a waiver of payroll tax for four months. A payroll tax exemption has been extended for new apprentices and trainees in the 2020-21 income year. Also, the future uplift of payroll tax thresholds will be brought forward to assist some businesses with their future obligations.
ACT COVID-19 Stimulus Package
Starting in March 2020, the ACT government has announced a series of measures which provide waivers or deferrals of payroll tax. These waivers and deferrals are an attempt to combat the economic fallout from the COVID-19 pandemic. Waivers of ACT payroll tax are available for businesses in hospitality, creative arts and entertainment industries. Deferrals are available for other small and medium-sized businesses. Initially lasting 6 months, some of these assistance measures have been extended into 2021.
Announcement (6-Oct-2020) Consultation Introduced (7-Oct-2020) Passed (9-Oct-2020) Royal Assent (14-Oct-2020) Date of effect
Announcement: 17-Mar-2020 Updated: 23-Dec-2020
Announcement: 22-Mar-2020 Updated: 23-Dec-2020
FBT Exemption for Retraining and Reskilling Proposed
An employer may receive a future exemption from fringe benefits tax when providing employees with retraining or reskilling opportunities. This 2020 federal budget announcement will take affect from 2 October 2020, subject to the passing of legislation. The government has also released a consultation paper with respect to possible changes to the self-education deduction section for individual taxpayers. These measures may provide a tax incentive for employees to change careers, in particular if they are about to be made redundant.
Announcement (6-Oct-2020) Consultation (22-Jan-2021) Introduced Passed Royal Assent Date of effect
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