The Balancing Act.
Government: “We have a big debt, but we need to please voters people and keep the COVID economic recovery going strong.. Actually, the debt is not as bad as we thought, so we can spend more – right?”
The key initiatives include:
- Extension of temporary full expensing and loss-carry back providing immediate deductions for business investment in capital assets
- Introduction of a ‘patent box’ offering tax concessions on income derived from medical and biotech patents
- Tax and investment incentives for the digital economy
- Extension of the low-and-middle-income tax offset
- Childcare subsidy increase for families with multiple children
- $17.7 billion over 5 years to reform aged care
- $2.3 billion on mental health infrastructure and programs
- New and extended home ownership programs for first home owners and single parents
Below we take a closer look into the most relevant items for business owners.
For further detail, download our comprehensive Federal Budget 2021-22 Guide.
TEMPORARY FULL EXPENSING
Businesses with an aggregated turnover of <$5bn will be able to continue to fully expense the cost of new/improved depreciable assets in the first year of use rather than claimed over the asset’s life.
The extension means that the rules apply to assets that are first used or installed ready for use by 30 June 2023.
TEMPORARY LOSS-CARRY BACK EXTENSION
Companies with an aggregated turnover of <$5bn will be able to carry back losses from FY20, FY21, FY22 and now FY23 to offset previously taxed profits in FY19, FY20, FY21 and FY22.
To access this, companies will need to make an election when lodging their FY21, FY22 and/or FY23 tax returns.
Refer to the Federal Budget 2021-22 Guide for more details.
TAX & INVESTMENT INCENTIVES FOR THE DIGITAL ECONOMY
The Government has committed to new and expanded funding to invest in the growth of digital industries and the adoption of digital technologies by small business.
These measures include:
- ‘Patent box’ regime allowing for a concessional corporate tax rate of 17% for Australian medical and biotechnology patent income from 1 July 2022
- Digital games refundable tax offset of 30%, effective from 1 July 2022
- Self assessment of effective life of certain intangible assets, from 1 July 2023 (after temporary full expensing regime has concluded)
- Review of venture capital tax incentives to attract local and foreign investors to early-stage Australian companies
- Emerging aviation technologies funding and support
- Artificial intelligence development grants and launch of national AI centre
- Expansion of small business digital support services
- Changes to Employee Share Schemes to defer taxing point in some circumstances
PERSONAL TAX, CHILDCARE & SUPERANNUATION
Good news for low and middle income earning families with children under 5 and for those looking to get into the housing market or downsizing.
Summary of the announcements include:
- Personal income tax cuts effective from 1 July 2020 (previously announced)
- Extension of Low Middle Income Tax Offset (LMITO) for another year to include FY22
- Bring forward increased Low Income Tax Offset (LITO) from $45 to $700
- Child care subsidies set to increase by 30% to a maximum subsidy of 95% of fees paid for 2nd and subsequent children under 5yrs, with the $10,560 cap also being removed from 1 July 2022
- First Home Super Saver Scheme (FHSSS) cap has been increased from $30k to $50k as of 1 July 2022
- New Home Guarantee Scheme extended to a further 10,000 places in FY22
- Reduce the minimum age from 65yo to 60yo for downsizers to contribute up to $300k each ($600k per couple) from the proceeds of sale of family home into super
- Scrapping the ‘work test’ for those aged 67-74 that want to make contributions to super from 1 July 2022
- Scrapping the $450 minimum monthly earning amount required before employees start being paid super
Download our Federal Budget 2021-22 Guide for more details.
Overall, it’s this humble writer’s opinion that this is a reasonably well-balanced budget in terms of spending today but doing so with one eye on Australia’s long term economic future. Not surprisingly there isn’t much here for climate change, but we all know I probably don’t have the expertise to be ‘going there’.
For more detail around all the measures released, download our comprehensive Federal Budget 2021-22 Guide.
Hope that helps!
As always, any questions – please don’t hesitate to let us know.
Author: Justin Araco
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