Significant changes to business tax 2021-22
Are you a business owner? There are some significant tax changes for businesses this financial year that you should be aware of. Read on to learn more!
Temporary full expensing of depreciating assets
This is an outright deduction for the cost of a depreciating asset first acquired after 7:30pm on 6 October 2020 and first used, or installed ready for use, by 30 June 2022 (although the Federal Government has announced a 12-month extension to 30 June 2023).
It is important to note that:
- The asset must be located in Australia and principally used in Australia;
- Small and medium businesses (aggregated turnover of less than $50 million), but not larger businesses, can use temporary full expensing for second-hand assets;
- Temporary full expensing is not available if your business disposes of the asset in the same income year you acquire it;
- Your business can opt out of temporary full expensing for an income year on an asset-by-asset basis unless your business is a small business entity that uses the simplified depreciation rules.
A consequence of temporary full expensing is that, in 2020–21 and 2021–22 (and 2022–23 when the 12-month extension for temporary full expensing becomes law), small business entities must deduct the full amount of the balance of their general small business pool (provided it is greater than zero).
A company (but not a sole trader, trust or partnership) can carry back a tax loss made in the 2019–20, 2020–21 or 2021–22 income year to an earlier income year (but not before 2018–19). This will generate a refundable tax offset called a ‘loss carry-back tax offset’. This is an alternative to carrying a tax loss forward to set off against profits in a future tax year.
The Government has announced that the loss carryback will be extended by 12 months so that a company will also be able to carry back a tax loss made in the 2022–23 income year.
A medium business is one whose aggregated turnover is at least $10 million but less than $50 million. The following small business concessions were extended to medium businesses from 2020–21:
- The prepayment rules; and
- The immediate deduction for certain start-up expenses.
As noted above, other small business concessions started to apply to medium businesses from 1 July 2021.
Tax changes from 1 July 2021
A number of changes apply from 1 July 2021. These include:
- Medium businesses (aggregated turnover of at least $10 million but less than $50 million) can use the simplified trading stock rules, the GDP-adjusted notional tax method to work out PAYG instalments and the simplified GST accounting method.
- Single Touch Payroll (STP) reporting:
- STP applies to small employers (1–19 employees) in relation to closely-held payees (eg family members and directors and shareholders if the employer is a company); and
- The quarterly reporting concession for micro employers (1–4 employees) only applies to employers who report through a registered tax professional and where exceptional circumstances exist.
Note that STP Phase 2 (requiring employers to provide additional payroll information through STP) begins on 1 January 2022.
- Amending assessments – the standard time limit for amending assessments is reduced from 4 years to 2 years for medium businesses (applicable for income years commencing on or after 1 July 2021) – this is the same as for small businesses.
- Superannuation guarantee – the superannuation guarantee charge percentage increased to 10% (it is legislated to gradually increase each year until 1 July 2025 when it becomes 12%). The maximum contribution base for 2021–22 increased to $58,920 (from $57,090).
- R&D tax offset – changes in how the offset is calculated, an increase in the expenditure threshold from $100 million to $150 million and new clawback rules.
- Film incentives – once the relevant legislation is passed by Parliament, some of the rules about qualifying Australian production expenditure (QAPE) will change, the producer offset for films that are not featured films released in cinemas will increase to 30% of total QAPE and there will be various threshold and integrity changes across the 3 different offsets (location, producer, Post, Digital and Visual Effects (PDV)).
- Exemptions – the fringe benefits tax (FBT) exemptions for car parking and work-related electronic devices available to small businesses have been extended to medium businesses (aggregated turnover of at least $10 million but less than $50 million) from 1 April 2021.
- Retraining – retraining and reskilling benefits provided by an employer to redundant employees to enable them to obtain new employment are exempt from FBT, provided the employer complies with any redundancy obligations under the Fair Work Act 2009. The exemption does not extend to relatives of the employer or if the employer is a company, shareholders, directors and their relatives. The exemption does not cover tertiary education fees and HELP loan repayments.
Contact KMT tax adviser to find out about any changes that might affect your business.
No GDP adjustment for 2021–22
The GST and PAYG instalment amounts are usually adjusted every year using a formula known as the gross domestic product (GDP) adjustment.
However, the ATO has announced that the GDP adjustment to work out quarterly GST and PAYG instalment amounts for the 2021–22 income year is nil. It was also nil for 2020–21.
Key tax dates
|21 Sep 2021||August monthly BAS due|
|30 Sep 2021||Finalisation due date by payers of PAYG withholding payments reporting through STP for closely held payees|
|21 Oct 2021||September monthly BAS due
Payment of annual PAYG instalment for 2020–21
|28 Oct 2021||September quarter BAS due
Payment of first PAYG instalment for 2021–22 by quarterly payers
|31 Oct 2021*||2020-21 income tax return due|
|PAYG withholding annual reports due (no ABN withholding; interest, dividend and royalty payments paid to non-residents; and payments to foreign residents)|
|21 Nov 2021*||October monthly BAS due|
* These dates fall on a Sunday, so the due date is the next business day.
The article is provided for general information purposes only and is not intended as professional advice. Readers should not act on the information contained therein without professional advice from a suitably qualified accountant.
Contact our KMT registered tax agent if you need assistance with your business tax!
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