Deduction boosts for small business: skills and training and digital adoption
The Government announced two support measures for small businesses (aggregated annual turnover less than $50 million) in the form of a 20% uplift of the amount deductible for expenditure incurred on external training courses, and digital technology.
External training courses
An eligible business will be able to deduct an additional 20% of expenditure incurred on external training courses provided to its employees. The training course must 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.
The boost will apply to eligible expenditure incurred from 7:30pm (AEDT) on 29 March 2022 until 30 June 2024.
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 2024, will be included in the income year in which the expenditure is incurred.
An eligible business will be able to deduct an additional 20% of the cost incurred on business expenses and depreciating assets that support its digital adoption, such as portable payment devices, cyber security systems or subscriptions to cloud-based services. An annual cap will apply in each qualifying income year so that expenditure up to $100,000 will be eligible for the boost.
The boost will apply to eligible expenditure incurred from 7:30pm (AEDT) on 29 March 2022 until 30 June 2023. 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.
Scope of concessional tax treatment of patent box income extended
In the 2021-22 Budget, the Government announced the introduction of concessional tax treatment for eligible corporate income associated with new patents in the medical and biotechnology sectors (referred to “patent box” income).
Under legislation currently before Parliament (Treasury Laws Amendment (Tax Concession for Australian Medical Innovations) Bill 2022), such income will be taxed at a concessional rate of 17%, with effect for income years starting on or after 1 July 2022. Eligible income will be taxed at the concessional tax rate to the extent that the R&D of the innovation took place in Australia.
The Government will now extend the patent box income measures to provide concessional tax treatment for corporate taxpayers who:
- commercialise their eligible patents linked to agricultural and veterinary chemical products listed on the Australian Pesticides and Veterinary Medicines Authority’s Public Chemicals Registration Information System register, or eligible Plant Breeder’s Rights; or
- commercialise their patented technologies which have the potential to lower emissions. Patents relating to low emissions technology, as set out in the 140 technology areas listed in the Government’s 2020 Technology and Investment Roadmap Discussion Paper or included as priority technologies in the Government’s 2021 and future annual Low Emissions Technology Statements will be within scope, provided the patented technology is considered to reduce emissions.
In both cases, patent box income will be taxed at an effective income tax rate of 17% in relation to rights and patents granted or issued after 29 March 2022 and for income years starting on or after 1 July 2023.
The Government is expected to consult with industry before settling the detailed design of the patent box extension.
PAYG instalments: option to base on financial performance
The Budget papers confirm the Treasurer’s earlier announcement that companies will be allowed to choose to have their PAYG instalments calculated based on current financial performance, extracted from business accounting software (with some tax adjustments).
Date of effect
The commencement date is “subject to advice from software providers about their capacity to deliver”. It is anticipated that systems will be in place by 31 December 2023, with the measure to commence on 1 January 2024, for application to periods starting on or after that date.
There are no details as to what tax adjustments will be required (although presumably this will involve a reverse, modified form of tax effect accounting).
PAYG and GST instalment uplift factor: 2% for 2022-23
The Budget papers confirm the Treasurer’s earlier announcement that the GDP uplift factor for PAYG and GST instalments will be set at 2% for the 2022-23 income year. The papers state that this uplift factor is lower than the 10% that would have applied under the statutory formula.
Date of effect
The 2% GDP uplift rate will apply to small to medium enterprises eligible to use the relevant instalment methods (up to $10 million annual aggregated turnover for GST instalments and $50 million annual aggregated turnover for PAYG instalments) in respect of instalments that:
- relate to the 2022-23 income year, and
- fall due after the enabling legislation receives assent.
Employee share schemes for unlisted companies: thresholds amended
The Budget confirms the Government’s intention to change the investment thresholds for unlisted companies in relation to employee share schemes. Where employers make larger offers in connection with employee share schemes in unlisted companies, participants can invest up to:
- $30,000 per participant per year, accruable for unexercised options for up to 5 years, plus 70% of dividends and cash bonuses; or
- any amount, if it would allow them to immediately take advantage of a planned sale or listing of the company to sell their purchased interests at a profit.
The Government will also remove regulatory requirements for offers to independent contractors, where they do not have to pay for interests.
Date of effect
No date of effect is specified in the Budget papers.
More Covid-19 business grants designated non-assessable non-exempt income
The Government has extended the measure which enables payments from certain State and Territory COVID-19 business support programs to be made non-assessable non-exempt (ie NANE) for income tax purposes until 30 June 2022. This measure was originally announced on 13 September 2020.
Consistent with this, the Government has made the following State and Territory grant programs eligible for this treatment since the 2021-22 MYEFO:
- New South Wales Accommodation Support Grant
- New South Wales Commercial Landlord Hardship Grant
- New South Wales Performing Arts Relaunch Package
- New South Wales Festival Relaunch Package
- New South Wales 2022 Small Business Support Program
- Queensland 2021 COVID-19 Business Support Grant
- South Australia COVID-19 Tourism and Hospitality Support Grant
- South Australia COVID-19 Business Hardship Grant
Date of effect
The changes are part of an ongoing series of announcements which will continue to have effect until 30 June 2022 (subject to further extension).
Concessional tax treatment of carbon credit and biodiversity certificate income
The Government will allow the proceeds from the sale of Australian Carbon Credit Units (ACCUs) and biodiversity certificates generated from on-farm activities to be treated as primary production income for the purposes of the Farm Management Deposits (FMD) scheme and the tax averaging provisions from 1 July 2022.
The Government will also change the taxing point of ACCUs for eligible primary producers to the year when they are sold, and extend similar treatment to biodiversity certificates issued under the Agriculture Biodiversity Stewardship Market scheme, from 1 July 2022. Eligible primary producers are those who are currently eligible for the FMD scheme and tax averaging.
Currently, proceeds from selling ACCUs are treated as non-primary production income and are generally ineligible for concessional tax treatment under the FMD scheme or tax averaging. ACCU holders are taxed based on changes in the value of their ACCUs each year, which can result in tax liabilities before sale.
Wholly owned Australian incorporated subsidiaries of the Future Fund Board of Guardians (ie the “Future Fund Board”) will be exempt from corporate income tax.
Currently, the Future Fund Board is exempt from income taxes, but this exemption does not extend to its wholly owned subsidiaries. As a result, these subsidiaries pay corporate income tax, which is subsequently refunded to the Future Fund Board via franking credits attached to the dividends paid to it by the subsidiaries.
Extending this exemption will remove the administrative burden associated with the payment of tax by the subsidiaries and subsequent claiming of a refund.
Date of effect
The measure will commence from the first income year after the amending legislation receives assent.