With the federal election only a couple of months away, it was no surprise to see a Budget filled with announcements that will appeal to voters – such as cost-of-living relief payments, tax cuts, improved parental leave, small business incentives, and investing in healthcare and essential services. While superannuation was largely untouched, there were several proposed changes to both individual and business taxation. Overall, the government focused on continuing its path to economic recovery through creating job opportunities, spending on large infrastructure projects, and encouraging business investment.
As it is an election year, the importance in reviewing the changes will be if they are legislated prior to the election. We recommend that you note the changes but do not make decisions based on these changes until we have more details of the legislation and confirmation that it is to be enacted.
The main changes to note from the budget are as follows:
- One-Off Cost of Living Tax Offset
- Small Business- Technology Investment Boost
- Small Business- Skills and Training Boost
- Additional Reporting for Business
One-Off Cost Of Living Tax Offset
The government will provide a one-off $420 cost of living tax offset via an increase to the existing low- and middle-income tax offset (LMITO) for 2021-22.
This will be managed through the lodgement of your tax return.
Please note there is talk in the media of individuals receiving $1,500 in tax refunds. This will not in fact be the reality, as the tax you would pay without this has reduced by this amount but for those who are employees, you have received the benefit of the $1,080 through the year with the reduction in the tax your employer has withheld.
Therefore, with the lodgement of your return if you are in the tax bracket eligible for the offset you will receive the additional refund of $420.
Please view the table below for an outline:
Small Business- Technology Investment Boost
The important item to note with this change is that we don’t have clear guidelines from the announcement as to what is to be included in the tax deduction. Also, the tax benefit will not be received until the lodgement of the 2023 Tax Return, so there is no rush to bring forward expenditure in this area.
For now, we recommend that if there is expenditure you anticipate may be deductible, that you set up a new account to track this expenditure and then once we have the legislation, we can determine the eligibility. If you have a project that the expenditure is to be greater than $100,000, please contact us to review the options available.
Overall, the proposed changes are that for small businesses (those with an annual aggregated turnover of less than $50 million) they will be able to deduct, and additional 20% of expenditure incurred on business expenses and depreciating assets that support their digital adoption up to a cap of $100,000.
The claimable expenditure will be incurred in the following periods:
- 30th March 2022 to 30 June 2022- the additional 20% will be claimable in the 2023 year
- Between 1 July 2022 and 30 June 2023- additional 20% claimed in the 2023 financial year as well.
As an example, if an eligible small business was to spend $10,000, they would receive an additional deduction of $2,000, reducing their tax bill by $500 (based on 25% company tax rate).
Small Business – Skills and Training Boost
This deduction is similar to the Technology Investment Boost except it is for Skills and training of your employees (it will not be deductible if it is for contractors) and this is for expenditure to 30 June 2024.
The key with this legislation is the definition of what training will be included. The government has advised that it needs to be an external training course delivered by a registered training organisation registered in Australia.
Additional Reporting for Business
Lastly it was announced that for those sectors required to submit Taxable Payment Summaries for contractors (ie Construction Industry, Cleaning and IT etc). that this reporting will be quarterly from 1 January 2024.
Also, the current STP data that the ATO is collecting on wages paid, will in future be reported to the States. It is anticipated that this will then lead to an increase of audit activity by the states on Payroll Tax.
Overall, the changes are positive but as always, the devil is in the detail and the passing of the legislation. The challenge for businesses which is highlighted in the Budget is the further reduction of the unemployment rate which signifies further challenges with staff shortages. The reduction of the fuel excise will reduce some pressures that were felt with the increase in fuel prices.
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