Last week the federal government handed down the 2022/23 federal budget.
As expected, it was a modest election year budget, focussing on measures to assist with rising inflation and the costs of living.
We have now gone through the budget initiatives and summarised below, those that are relevant to you as a stakeholder in a family business.
$120 deduction for every $100 spent on technology
From: 7:30pm AEDT, 29 March 2022 until 30 June 2023
The Government intends to provide a 120% tax deduction for expenditure incurred by small businesses on business expenses and depreciating assets that support their digital adoption, such as portable payment devices, cyber security systems or subscriptions to cloud based services.
The technology boost will be available to small business with an aggregated annual turnover of less than $50 million.
An annual expenditure cap of $100,000 will apply to the boost.
The boost for eligible expenditure incurred by 30 June 2022 will be claimed in tax returns for the following income year. The boost for eligible expenditure incurred between 1 July 2022 and 30 June 2023 will be included in the income year in which the expenditure is incurred. That is, the additional deduction available under this measure is expected to be claimed in the 2023 tax return.
- Media release: Digital and skills tax boost for small businesses
$120 deduction for every $100 spent on skills and training
From: 7:30pm AEDT, 29 March 2022 until 30 June 2024
The Government intends to provide a 120% tax deduction for expenditure incurred by small businesses on external training courses provided to employees. The deduction will be available to small business with an aggregated annual turnover of less than $50 million. External training courses will need to be provided to employees in Australia or online, and delivered by entities registered in Australia.
Some exclusions will apply, such as for in-house or on-the-job training and expenditure on external training courses for persons other than employees.
We assume there will need to be a nexus between the employee’s employment and the training program undertaken for the boost, although we are waiting on further details of this initiative to be released.
The boost for eligible expenditure incurred by 30 June 2022 will be claimed in the tax return for the following income year (that is, the 2023 tax return). The boost for eligible expenditure incurred between 1 July 2022 and 30 June 2024, will be included in the income year in which the expenditure is incurred.
- Media release: Digital and skills tax boost for small businesses
Apprentice wage subsidy support extended
Just prior to the Federal Budget, the Government announced the extension of the:
- Boosting Apprenticeship Commencements wage subsidy, and
- Completing Apprenticeship Commencement wage subsidy.
Any employer (or Group Training Organisation) who takes on an apprentice or trainee up until 30 June 2022 can gain access to:
- 50% of the eligible Australian Apprentice’s wages in the first year, capped at a maximum payment value of $7,000 per quarter per Australian Apprentice,
- 10% of the eligible Australian Apprentice’s wages in the second year, capped at a maximum payment value of $1,500 per quarter per Australian Apprentice, and
- 5% of the eligible Australian Apprentice’s wages in the third year, capped at a maximum payment value of $750 per quarter per Australian Apprentice.
- Media release: Extending support to get more Australian apprentices on the job
- Boosting Apprenticeship Commencements wage subsidy and Completing Apprenticeship Commencements wage subsidy
- Applications are through the Australian Apprenticeships Support Network
Tax deductibility of COVID-19 test expenses
From: 1 July 2021
As previously announced, work-related COVID 19 test expenses incurred by individuals will be made tax-deductible.
Changes will also be made to ensure that FBT will not be payable by employers if they provide fringe benefits relating to COVID 19 testing to their employees for work-related purposes.
The changes for deductions will be effective from 1 July 2021, with the FBT changes to apply from 1 April 2021.
At this stage, it is not entirely clear whether the deduction rules will cover expenses incurred where the employee is able to work from home. The initial media release indicates that the measure will cover situations where the individual has the option of working remotely, while the Budget only refers to costs of taking a COVID-19 test to attend a place of work but doesn’t specifically refer to employees who can work from home.
- Media release: Tax deductibility of COVID-19 test expenses
Sharing of Single Touch Payroll data
As announced prior to the Budget, the Government will commit $6.6 million for the development of IT infrastructure that will enable the ATO to share Single Touch Payroll (STP) data with State and Territory Revenue Offices on an ongoing basis.
The funding will be deployed following further consideration of which states and territories are able and willing to make investments in their own systems and administrative processes to pre-fill payroll tax returns with STP data in order to reduce compliance costs for businesses
‘Patent Box’ tax regime extended to agriculture and emissions
The Patent Box tax regime was announced in the 2021-22 Budget for the medial and biotech industries and provides a concessional effective corporate tax rate of 17% on income derived from patents, to the extent that the taxpayer undertakes the R&D of that patent in Australia.
The Government has announced an extension of the regime to:
- Technology focused innovations to reduce emissions in line with the Government’s target to achieve net zero emissions by 2050, and
- Practical, technology focused innovations in the Australian agricultural sector.
Note that the legislation enabling the original 2021-22 Budget measure has not been enacted and is currently before Parliament – see Treasury Laws Amendment (Tax Concession for Australian Medical Innovations) Bill 2022.
What wasn’t in the budget?
One key initiative that received no mention in this budget was the Instant Asset writeoff and Temporary full expensing measures. These have been in place now for several years with various thresholds.
There was no extension of these measures meaning that they will only apply to assets acquired and installed ready for use prior to 30 June 2023. (pending no extension in the May 2023 budget).
Please remember this date if you are looking to acquire capital Assets and to write them off in full. The Assets need to be installed and ready for use by 30 June 2023. This could be a challenge where there are long lead times for the delivery of assets, due to current supply challenges.
Quantum Advisory is a business accounting and advisory firm that empowers family businesses to step up, scale up and sell up. Visit www.qagroup.com.au or call 1300 700 711 and start the journey.