The Federal Government handed down the FY2022 budget on the 29th March 2022. Read on to find out what it means for your business as prepared by the Fullstack Team.
Deduction of $120 for every $100 spent on technology
The Small Business Technology Investment Boost will provide small firms with a 120 percent tax break for business expenses and depreciating assets that promote their digital adoption, such as portable payment devices, cyber security systems, or subscriptions to cloud-based services.
Small businesses with an aggregated yearly revenue of less than $50 million will be eligible for the technology boost.
The measure will be subject to a $100,000 annual expenditure cap.
The tax deduction for eligible expenditure incurred by 30 June 2022 will be claimed in the next income year’s tax return. The tax deduction will also be applied to qualified expenditure incurred between 1 July 2022 and 30 June 2023. The increased deduction therefore provided by this measure is to be claimed in the 2023 income tax return.
Deduction of $120 for every $100 spent on AUS technology training
The Small Business Skills and Training Boost will allow a 120% tax deduction for eligible courses to train new employees, or to upskill existing employees. The external training courses must be provided to employees in Australia or online, delivered by entities registered in Australia.
This is for small businesses (less than $50m aggregated turnover) and applies from 7.30pm AEDT, 29 March 2022 until 30 June 2024. For expenditure in FY2022 (from 29 March 2022) and FY2023, the deduction should be included in the FY2023 tax return. For expenditure in FY2024, the deduction should be included in the FY2024 tax return.
Reducing small business tax instalments
Typically, GST and PAYG instalment amounts are modified in accordance with a GDP adjustment or uplift. The Government has set this uplift factor at 2% for the 2022-23 fiscal year, rather than the 10% that would have been imposed.
The 2% rate increase will apply to small to medium-sized firms that are entitled to use the applicable instalment schemes for instalments due after the amended legislation takes effect for the 2022-23 income year:
- Annual aggregated revenue of up to $10 million for GST instalments
- Annual aggregate revenue of $50 million for PAYG instalments
Increasing access to employee stock options
An Employee Share Scheme (ESS) is a scheme in which shares in a company, or rights to acquire shares in a company, are issued to an employee or their associate in exchange for their services.
On a commercial level, ESS arrangements are frequently used to better align the interests of employers and employees, as employees are given the opportunity to share in the company’s profitability and growth. The arrangements can also be beneficial in situations where a company is just getting started and does not have enough cash flow or reserves to attract top-tier employees with high salaries.
The government has proposed changes to the ESS rules in order to broaden access to schemes so that employees at all levels can directly contribute to the company’s growth.
Participants can invest up to: when employers make larger offers in connection with employee share schemes in unlisted companies.
$30,000 per participant per year for unexercised options for up to 5 years, plus 70% of dividends and cash bonuses; or
Any amount if it allows them to profit immediately from a planned sale or listing of the company’s purchased interests.
The government will also eliminate regulatory requirements for offers to independent contractors that do not require them to pay interest.
While these changes may make employee share plans more accessible, it is important to consider the tax implications that may arise for employees who receive shares or options at a discount to their market value. Employees can be taxed in a variety of ways in this area, and the treatment will often depend on how the ESS arrangement was structured by the company.
Connecting PAYG payments to financial performance
Companies will be able to choose to have their pay as you go (PAYG) instalments calculated using current financial performance extracted from business accounting software, with some tax adjustments, as announced prior to the Budget.
The move is intended to ensure that instalment liabilities are aligned with the cashflow of the business. Furthermore, digitizing PAYG instalments will increase transparency and provide more accurate performance data.
As previously announced before to the Budget, businesses would have the option of having their pay as you go (PAYG) instalments computed using current financial performance derived from their business accounting software, with some tax modifications.
The move is aimed to guarantee that instalment liabilities are consistent with the cash flow of the firm. Additionally, digitizing PAYG instalments increases transparency and provides more accurate performance statistics.
Agriculture and emissions are included in the ‘Patent Box’ tax regime
The Patent Box tax scheme, which was proposed in the 2021-22 Budget for the medial and biotech industries, gives a concessional effective corporation tax rate of 17% on income produced from patents, to the extent that the taxpayer conducts the patent’s research and development in Australia.
The Government has announced the extension of the regime to include the following:
- Innovations centered on technology to cut emissions in accordance with the government’s goal of achieving net-zero emissions by 2050, and
- Innovations in the Australian agricultural sector that are practical and technology-driven.
Notably, the legislation authorizing the original 2021-22 Budget item has not been implemented and is now being considered by Parliament – see Treasury Laws Amendment (Tax Concession for Australian Medical Innovations) Bill 2022.
Applies to patents relating to low emissions technology, as defined in the Government’s 2020 Technology and Investment Roadmap Discussion Paper or as identified as priority technologies in the Government’s 2021 and subsequent annual Low Emissions Technology Statements, provided the patented technology is considered to reduce emissions.
Applies to corporate entities that commercialize their eligible patents relating to agricultural and veterinary (agvet) chemical products that are registered with the Australian Pesticides and Veterinary Medicines Authority (APVMA), the PubCRIS (Public Chemical Registration Information System) registry, or eligible Plant Breeder’s Rights (PBRs).
Up-to-date information about medical and biotechnology advancements
Since the initial announcement, the Government has expanded the patent box regime in two key ways:
- Allowing access to the regime for patents issued by the United States Patent and Trademark Office or granted under the European Patent Convention, and
- Allowing for eligibility of patents issued after Budget night, rather than just those applied for after Budget night.
Taxpayers will continue to benefit from the patent box’s preferential tax treatment solely to the degree that the R&D happened in Australia.
Data sharing for Single Touch Payroll
As previously announced, the government will commit $6.6 million to the development of IT infrastructure that will allow the ATO to share Single Touch Payroll (STP) data with State and Territory Revenue Offices on an ongoing basis.
Following further consideration of which states and territories are able and willing to invest in their own systems and administrative processes to pre-fill payroll tax returns with STP data in order to reduce compliance costs for businesses, the funding will be deployed.
Delayed ABN integrity measure
The Government declared in the 2019-20 Budget that holders of Australian Business Numbers (ABNs) would lose their ABNs if they failed to lodge their income tax return. Additionally, ABN holders would be obliged to certify the accuracy of their business information on the Australian Business Register on an annual basis.
This step has been delayed for 12 months, which means that the duty to lodge tax returns will begin on 1 July 2022, with yearly confirmation of ABN details beginning on 1 July 2023.
COVID-19 grants and their tax status
The provision allowing payments from some COVID-19 business support programs to be considered as non-assessable non-exempt (NANE) income has already been extended until June 30, 2022.
Since the 2021-22 MYEFO, the Government has indicated that the following state and territory award programs are eligible for this treatment, while it is unclear whether the required legislative instruments have been published yet:
- Accommodation Support Grant in New South Wales
- Hardship Grant for Commercial Landlords in New South Wales
- Package for the Relaunch of the Performing Arts in New South Wales
- Package for the Relaunch of the New South Wales Festival
- Small Business Support Program for New South Wales 2022
- COVID 19 Business Support Grant 2021 Queensland
- COVID 19 Tourism and Hospitality Support Grant in South Australia
- COVID 19 Business Hardship Grant in South Australia.
This adds to the list of New South Wales and Victoria grants that are already eligible for NANE income treatment.
Expenses associated with COVID-19 testing are tax deductible
As previously disclosed, individuals will be able to deduct COVID19 test fees incurred for work-related purposes.
Additionally, changes will be made to ensure that employers are not liable for FBT if they give COVID19 testing to their workers for work-related purposes.
The changes to deductions will take effect on 1 July 2021, while the changes to the FBT will take effect on 1 April 2021.
At the moment, it is unclear if the deduction regulations would apply to expenses made by employees who are permitted to work from home. The initial media release indicates that the measure will apply to situations in which an individual has the option of working remotely, whereas the Budget refers only to the costs associated with taking a COVID-19 test in order to attend a place of work and makes no mention of employees who can work from home.
If you require assistance with tax advice, please contact Fullstack Advisory. We assist hundreds of small to medium businesses with tax compliance, advisory and bookkeeping via a convenient series of membership packages.