Federal Budget 2022: For business and employers
Training, digital transformation, stronger compliance, and expanding employee share schemes were the focus points for this years’business measures.
Aside from next year’s expected budget deficit reduction, there wasn’t much for the Government to crow about. Whilst unemployment rates are at their lowest in may years, many business owners are concerned about the surge of inflation, supply chain challenges, and skill shortages. So what’s in the Budget for business?
$120 deduction for every $100 spent on technology
7:30pm AEDT, 29 March 2022 until 30 June 2023
The Government intends to provide a 120% tax deduction for expenditure incurred by small businesses on business expenses and depreciating assets that support their digital adoption, such as portable payment devices, cyber security systems or subscriptions to cloud based services.
The technology boost will be available to small business with an aggregated annual turnover of less than $50 million.
An annual expenditure cap of $100,000 will apply to the boost.
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. That is, the additional deduction available under this measure is expected to be claimed in the 2023 tax return.
Lowering tax instalments for small business
2022-23 income year
Normally, GST and PAYG instalment amounts are adjusted using a GDP adjustment or uplift. For the 2022-23 income year, the Government is setting this uplift factor at 2% instead of the 10% that would have applied.
The 2% uplift rate will apply to small to medium enterprises eligible to use the relevant instalment methods for instalments for the 2022-23 income year and are due after the amending legislation comes into effect:
- Up to $10 million annual aggregated turnover for GST instalments and
- $50 million annual aggregated turnover for PAYG instalments
Expanding access to employee share schemes
In broad terms, an Employee Share Scheme (ESS) is a scheme under which shares in a company, or rights to acquire shares in a company, are issued to an employee or their associate in respect of their employment.
At a commercial level, ESS arrangements are often used to better align the interests of employers and employees, as employees are provided with an opportunity to share in the profitability and growth of the business. The arrangements can also be useful in situations where a business is in start-up mode and does not have significant cash flow or reserves to attract top quality employees with high salaries.
The Government has flagged changes to the ESS rules to expand access to schemes so that employees at all levels can directly share in the growth of the business.
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 per cent 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.
While these changes might expand access to employee share schemes, it is important to consider the tax implications that can arise for employee when they receive shares or options at a discount to their market value. There are a number of different ways that employees can be taxed in this area and the treatment will often depend on how the ESS arrangement has been structured by the company.
‘Patent Box’ tax regime extended to agriculture and emissions
The Patent Box tax regime was announced in the 2021-22 Budget for the medial and biotech industries and provides a concessional effective corporate tax rate of 17% on income derived from patents, to the extent that the taxpayer undertakes the R&D of that patent in Australia.
The Government has announced an extension of the regime to:
- Technology focused innovations to reduce emissions in line with the Government’s target to achieve net zero emissions by 2050, and
- Practical, technology focused innovations in the Australian agricultural sector.
Patents granted after 29 March 2022
Income years starting on or after 1 July 2023
Applies to 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, provided the patented technology is considered to reduce emissions.
Patents granted after 29 March 2022
Income years starting on or after 1 July 2023
Applies to corporate entities that commercialise their eligible patents linked to agricultural and veterinary (agvet) chemical products listed on the Australian Pesticides and Veterinary Medicines Authority (APVMA), PubCRIS (Public Chemical Registration Information System) register, or eligible Plant Breeder’s Rights (PBRs).
Medical and biotechnology innovations updated
Since the original announcement, the Government has made two significant expansions to the patent box regime:
- Allowing patents issued by the United States Patent and Trademark Office or granted under the European Patent Convention to access the regime, and
- Allowing patents granted after Budget night to be eligible, rather than only those applied for after Budget night.
Taxpayers will still only benefit from the concessional tax treatment under the patent box to the extent that the R&D occurred in Australia.
Streamlining fuel and alcohol excise compliance
1 July 2023
From 1 July 2023, fuel and alcohol businesses with an annual turnover of less than $50 million will be able to lodge and pay excise and excise equivalent customs duty on a quarterly basis, rather than weekly or monthly. These businesses will lodge returns and pay excise by the 28th day of the month after the end of each quarter.
In addition, businesses that import fuel and alcohol products for further manufacture or distribution, and want to defer payment of excise or excise-equivalent customs duty, will be able to transfer the fuel or alcohol straight into a warehouse administered by the ATO once the products have gone through Australian Border Force (ABF) customs clearance. The ABF will still collect tax on direct imports.
Licensing requirements across the excise system will also be streamlined by:
- removing all renewal requirements for excise and excise equivalent customs goods licences; removing licence fees; enabling the ATO and ABF to issue entity level licences in addition to site level licences; and providing blanket permission to move goods between sites controlled by licensed businesses
- removing onshore producers of crude oil and condensate from the excise system until and unless they exceed the relevant production threshold to be liable for excise payments
- extending the time limit to apply for a refund of excise overpayments from 12 months to 4 years after payment, to align with refunds of customs duty
- creating a public register of excise and excise equivalent customs goods licences administered by the ATO.
And, the excise and excise-equivalent customs duty regime for fuel will be amended by:
- introducing a refund provision, similar to that in the excise law, for excise equivalent customs duty on petroleum based oils used in the further manufacture of petroleum lubricants, ending double taxation of these oils
- removing the requirement to pay and then claim Fuel Tax Credits in respect of excise or excise equivalent customs duty on fuels used in domestic commercial shipping (‘bunker fuels’), aligning their treatment with the duty-free treatment of bunker fuels for international voyages
- setting a single rate for businesses to calculate and claim Vapour Recovery Unit refunds.
The excise law will be amended to provide a targeted exemption from excise licensing requirements, up to a threshold of 10,000 litres per year, for licensed hospitality venues to fill beer from kegs into sealed, non-pressurised containers of no more than 2 litres capacity and not designed for medium to long term storage (‘growlers’).
Concessional tax treatment for carbon abatement and biodiversity stewardship
1 July 2022
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 tax averaging from 1 July 2022.
In addition, the taxing point of ACCUs for eligible primary producers will change to the year when they are sold, and similar treatment will be extended to biodiversity certificates issued under the Agriculture Biodiversity Stewardship Market scheme, from 1 July 2022. Currently, ACCU holders are taxed based on changes in the value of their ACCUs each year, which can result in tax liabilities prior to sale. Eligible primary producers are those who are currently eligible for the FMD scheme and tax averaging.
Temporary tariff concession on COVID-19 products permanent
1 July 2022
The temporary tariff concession in place for certain medical and hygiene products to treat, diagnose or prevent the spread of COVID 19 will be made permanent and the range of products to which the concession applies expanded.
Linking PAYG instalments to financial performance
1 January 2024
As announced prior to the Budget, 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.
The move is intended to ensure that instalment liabilities are aligned to the businesses cashflow. In addition, the digitisation of PAYG instalments will improve transparency and provide more accurate data on performance.
Digitising taxable payments reporting system
1 January 2024
As announced prior to the Budget, businesses will be able to report Taxable Payments Reporting System data via their accounting software on the same lodgment cycle as their activity statements.
The measure is expected to reduce the costs of complying with the system and increase transparency.
Sharing of Single Touch Payroll data
As announced prior to the Budget, the Government will commit $6.6 million for the development of IT infrastructure that will enable the ATO to share Single Touch Payroll (STP) data with State and Territory Revenue Offices on an ongoing basis.
The funding will be deployed following further consideration of which states and territories are able and willing to make investments in their own systems and administrative processes to pre-fill payroll tax returns with STP data in order to reduce compliance costs for businesses.
ABN integrity measure delayed
1 July 2022
Back in the 2019-20 Budget, the Government announced that Australian Business Number (ABN) holders would be stripped of their ABNs if they failed to lodge their income tax return. In addition, ABN holders would be required to annually confirm the accuracy of their details on the Australian Business Register.
This measure has been deferred for 12 months, which means that the tax return lodgement obligation is due to commence from 1 July 2022 with the annual confirmation of ABN details to commence from 1 July 2023.
Tax status of COVID-19 grants
The measure that enables payments from certain state and territory COVID-19 business support programs to be treated as non-assessable non-exempt (NANE) income has already been extended until 30 June 2022.
The Government has announced that the following state and territory grant programs have been made eligible for this treatment since the 2021-22 MYEFO, although it is not clear whether the relevant legislative instruments have been issued as yet:
- 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.
This builds on the list of existing grants paid by New South Wales and Victoria that can already qualify for NANE income treatment.
Tax deductibility of COVID-19 test expenses
1 July 2021
As previously announced, work-related COVID-19 test expenses incurred by individuals will be made tax deductible.
Changes will also be made to ensure that FBT will not be payable by employers if they provide fringe benefits relating to COVID-19 testing to their employees for work-related purposes. The changes for deductions will be effective from 1 July 2021, with the FBT changes to apply from 1 April 2021.
At this stage it is not entirely clear whether the deduction rules will cover expenses incurred where the employee is able to work from home. The initial media release indicates that the measure will cover situations where the individual has the option of working remotely, while the Budget only refers to costs of taking a COVID-19 test to attend a place of work but doesn’t specifically refer to employees who can work from home.
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