12 Sep Tax Measure Changes

Posted at 01:41h in Uncategorized by

By Ronald Cheng

In the 2021-22 Federal Budget, the government announced a one-year extension to the following two tax measures that were introduced in 2020-21 to provide support to businesses during the Covid19 pandemic:

Temporary full expensing

This tax measure allows eligible business entities to claim an immediate deduction in full (for the business portion) on their capital expenditure in the year it is first used or installed ready for use for a taxable purpose. Instead of depreciating the assets over several years, the immediate deduction encourages businesses to invest and improve on their own operations.

Eligibility:

  • A business with an aggregated turnover of less than $5 billion or a corporate tax entity that meets the alternative income test.
  • Eligible new assets first held, first used or installed ready for use between 7:30pm (AEDT) on 6 October 2020 and 30 June 2023
  • Eligible second-hand assets first held, first used or installed ready for use between 7:30pm (AEDT) on 6 October 2020 and 30 June 2023 and the entity’s aggregated turnover is less than $50 million.
  • Improvements incurred between 7:30pm (AEDT) on 6 October 2020 and 30 June 2022 to the eligible assets or existing assets that are held before 7:30pm (AEDT) on 6 October 2020.

Loss carry back tax offset

This tax measure allows eligible business entities to carry back tax losses incurred during FY2020, 2021, 2022 and 2023 to offset tax paid in FY2019 or later years, thereby assisting businesses with their cashflow through refunding taxes paid in an earlier income year.

Eligibility:

  • A company, corporate limited partnership or a public trading trust that chooses to carry the loss back and claim the tax offset
  • The entity is also a small business entity in the loss year
  • It made a tax loss and had an income tax liability (tax payable) in FY2019, 2020, 2021 or 2022
  • It has lodged its tax returns

Please contact your EQ8 representative for more information.

Tax deductibility of COVID-19 test expenses

After much speculation, the Government announced that COVID-19 tests, including Polymerase Chain Reaction (‘PCR’) and Rapid Antigen Tests (‘RATs’), will be both:

  • tax-deductible; and
  • exempt from FBT;

broadly where they are purchased for work-related purposes.

This will require the introduction of new specific legislation (i.e., to clarify that work-related COVID- 19 test expenses incurred by individuals will be tax-deductible or FBT exempt where employers provide the tests to their staff) which will apply both where an individual is required to attend the workplace or has the option to work remotely.

The Government intends that these changes take effect from the beginning of the 2022 income year and will apply permanently once enacted.