20th May, 2021
The Government will extend the temporary full expensing measure until 30 June 2023. It was otherwise due to finish on 30 June 2022.
Other than the extended date, all other elements of temporary full expensing will remain unchanged.
Currently, temporary full expensing allows eligible businesses to deduct the full cost of eligible depreciating assets, as well as the full amount of the second element of cost. A business qualifies for temporary full expensing if it is a small business (annual aggregated turnover under $10 million) or has an annual aggregated turnover under $5 billion. Annual aggregated turnover is generally worked out on the same basis as for small businesses, except that the threshold is $5 billion instead of $10 million.
There is an alternative test, so a corporate tax entity qualifies for temporary full expensing if:
If temporary full expensing applies to work out the decline in value of a depreciating asset, no other method of working out that decline in value applies.
Assets must be acquired from 7:30pm AEDT on 6 October 2020 and first used or installed ready for use by 30 June 2023.
Under the temporary, COVID-driven restoration of the loss carry-back provisions announced in the previous Budget, an eligible company (aggregated annual turnover of up to $5 billion) could carry back a tax loss for the 2019–2020, 2020–2021 or 2021–2022 income years to offset tax paid in the 2018–2019 or later income years.
The Government has announced it will extend this to include the 2022–2023 income year. Tax refunds resulting from loss carry-back will be available to companies when they lodge their 2020–2021, 2021–2022 and now 2022–2023 tax returns.
This is intended to 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. Temporary loss carry-back also complements the temporary full expensing measure by allowing more companies to take advantage of expensing, while it is available.
The Government will remove the cessation of employment as a taxing point for tax-deferred employee share schemes (ESSs). There are also other changes designed to cut “red tape” for certain employers.
Cessation of employment change
Currently, under a tax-deferred ESS and where certain criteria are met, employees may defer tax until a later tax year (the deferred taxing point). In such cases, the deferred taxing point is the earliest of:
The change announced in the latest Budget will result in tax being deferred until the earliest of the remaining taxing points.
Other regulatory changes
The Government will also:
01st Feb, 2018
The ATO has made a new determination that dividend equivalent payments made under an employee share scheme (ESS) are assessable to an employee as income when they receive the payment for or in connection with services they provide as an employee.
A “dividend equivalent payment” is a cash payment to an employee participant and beneficiary an ESS funded from dividends on which the trustee has been assessed in previous income years because no beneficiary of the trust was entitled to the income at the time.
A trustee that makes a dividend equivalent payment under an ESS must withhold an amount from the payment, even though the trustee is not the employee’s employer.
The new determination applies to dividend equivalent payments paid under the terms and conditions attached to ESS interests granted on or after 1 January 2018.