As a part of its strategy to drive economic recovery from the pandemic, the government has extended many concessions to businesses in the hopes of driving unemployment rate down and increasing GDP. Some of the measures expected to benefit businesses include the extension of temporary full expensing and loss carry-back. Small businesses will also be able to pause disputed ATO debt recovery in some cases, while those businesses affected by natural disasters may receive a tax exemption for certain grants.
The 2021 Federal Budget has been handed down with many sweeteners for businesses to help drive unemployment rates down and power the economic engine of Australia. It has been forecast that the unemployment rate will fall below 5%, reaching 4.75% by June 2023 quarter. While real GDP is predicted to grow by 1.25% in 2020-21, rising to 4.25% in 2021-22 and 2.5% in 2022-23. The suite of business measures include the following.
Temporary full expensing extended until 30 June 2023
The current temporary full expensing to allow eligible businesses to deduct the full cost of eligible depreciating assets will be extended until 30 June 2023. The measure was due to end on 30 June 2022 before the announcement of the extension. Other than the extended date, all other elements of the temporary full expensing remain unchanged. This means that a business will qualify if it is a small business (annual aggregated turnover under $10m) or has an annual aggregated turnover under $5bn.
Loss carry-back also extended by one year
The government will also seek to extend the loss-carry back provisions by one year. Under the original measure, eligible companies (with aggregated annual turnover of up to $5bn) could carry back a tax loss for the 2019-20, 2020-21 or 2021-22 income years to offset tax paid in the 2018-19 or later income years. Eligible tax loss years will now include the 2022-23 income year.
Tax refunds resulting from loss carry back will be available to companies when they lodge their 2020-21, 2021-22 and now 2022-23 tax returns. The government notes that this measure will help increase cash flow for businesses in future years and support companies that were profitable and paying tax but find themselves in a loss position as a result of the COVID-19 pandemic.
Small businesses will be able to pause disputed ATO debt recovery
Legislation will be introduced to allow small businesses to pause or modify ATO debt recovery action where the debt is being disputed in the AAT. Specifically, the changes will allow the Small Business Taxation Division of the AAT to pause or modify any ATO debt recovery actions, such as garnishee notices and the recovery of GIC or related penalties until the underlying dispute is resolved. Small business entities (including individuals that carry on a business) with an aggregated turnover of less than $10m per year will be eligible to use the option.
Other measures: disaster recovery grants tax exemption; self-assess effective life
The government will provide an income tax exemption for qualifying grants made to primary producers and small businesses affected by the storms and floods in Australia ((including certain recovery grants).
The Budget also confirmed that taxpayers will be able to self-assess the effective life of certain intangible assets (eg intellectual property and in-house software) rather than being required to use the effective life currently prescribed. Self-assessment of effective lives will apply to eligible assets acquired following the completion of the temporary full expensing measure.
Want more information?
If your business would like to take advantage of these new Budget measures, we can help you plan ahead. Remember, the legislation to implement these Budget measures has not yet been introduced, so care should be taken. Call us today and stay up-to-date with any developments.