2021/22 Federal Budget Summary - Business Tax Changes

The Government has provided further support for capital investment by businesses and assistance with cash flows by extending the “temporary full expensing” measure as well as the loss carry-back offset for an additional income year. Important changes to the minimum threshold for the superannuation guarantee charge (SGC) have also been announced.

Extension of Temporary Full Expensing

The temporary full expensing measures introduced in the 2020/21 budget provided a deduction for the full cost of eligible depreciating assets (first used or installed ready for use before June 30, 2022) to entities with aggregated turnover of less than $5 billion. The measure will now be extended until June 30, 2023 providing additional time for eligible entities to make capital investments and benefit from accelerated tax depreciation.

 All other features of the measure remain unchanged including the alternative test for entities that have aggregated turnover of $5 billion or more, the ability to opt-out on an asset-by-asset basis, availability of full expensing on capital improvements to existing depreciating assets and the ability to write off the entire balance of a general small business pool for small business entities using simplified depreciation.

Extension of Loss Carry-Back Provisions
Extension of Loss Carry-Back Provisions

The loss carry-back offset introduced in the 2020/21 budget will be extended by a further 12 months, allowing corporate entities to carry back tax losses for the 2022/23 income year for up to four income years, as far back as the 2018/19 income year. The loss carry-back offset is available to corporate tax entities with aggregated turnover of less than $5 billion and is intended to complement the temporary full expensing measure where tax losses are generated through significant capital investments that give rise to immediate deductions. The measure allows for cash refunds with the lodgement of the tax return rather than future tax savings from carrying forward tax losses to later years and can provide additional cash flow to support working capital for companies who make tax losses after previously being in a taxable position.

The loss carry-back offset is limited to a company’s franking account balance and this limitation may prevent entities from accessing the measure where they have paid out franked dividends during the year.

Removal of Minimum Income Threshold for Superannuation Guarantee

Currently, employers are not required to make superannuation contributions under the superannuation guarantee legislation for employees in receipt of salary and wages of less than $450 in any calendar month. Many employers have configured their payroll systems to accommodate this threshold. The Government has announced that this threshold is to be removed with effect, most likely from 1 July 2022. This measure will mean that superannuation support must be provided to all employees regardless of the level of income in any one month and is designed to ensure low income earners are not disadvantaged. The proposed changes will primarily impact employers with casual and part-time employees such as those in the retail and hospitality industries. Employers will need to keep track of this change to ensure their payroll systems are correctly set up to meet their obligations once the measures take effect.

Extending the SME Recovery Loan Scheme

The Government is extending the SME Recovery Loan Scheme. It includes an increased government guarantee of 80 per cent, a higher maximum loan size of $5 million and a maximum loan term of 10 years, with interest rates capped at roughly 7.5 per cent. Borrowers may also be offered repayment holidays of up to 24 months. The Scheme is available to SMEs with a turnover of up to $250 million. They must also have been recipients of the JobKeeper payment between January 4, 2021 and March 28, 2021 or were affected by the floods in eligible Local Government Areas in March 2021.

Industry Specific Business News

  1. Small craft brewers and distillers will receive an increase in the cap for claims on the Excise Refund Scheme from $100,000 to $350,000 from July 1, 2021.
  2. Almost $130 million is going to the New Enterprise Incentive Scheme (NEIS) and Entrepreneurship Facilitators Program, to support people who want to start, run and grow their own business.
  3. A 30% Digital Games Tax Offset for eligible businesses that spend a minimum of $500,000 on qualifying Australian games expenditure. This excludes unclassified games, or those that involve gambling.
  4. Aged Care scored a huge boost with $17.7 billion to be spent over 5 years including 80,000 home care packages and a supplement of $10 per resident, per day.

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In case you missed it - also make sure you check our Tax Planning Strategies Guide for 2021

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