In Josh Frydenberg’s fourth Federal Budget, has delivered less to businessowners than in recent years but will appeal to voters – such as cost-of-living relief payments, tax cuts, improved parental leave, small business incentives, and investing in healthcare and essential services

A review of the specifics of these changes for business can be found below.

One-off cost of living tax offset for Individuals

For 2021-22 income year only

The Government will increase the low and middle income tax offset (LMITO) for the 2021-22 income year. LMITO is targeted at low- and middle-income earners that are most susceptible to cost of living pressures. This proposal will increase the LMITO by $420 for the 2021-22 income year.

The LMITO for the 2021-22 income year will be paid from 1 July 2022 when Australians submit their tax returns for the 2021-22 income year. This proposal will increase the LMITO by $420 for the 2021-22 income year. Currently, the LMITO amount is between $255 and $1,080, and will therefore increase up to $1,500. It will phase out to nil for individuals with incomes between $90,001 and $126,000.

Small Business Skills and Training Boost

Effective from 29 March 2022 to 30 June 2024

Small businesses will be able to deduct an additional 20% of expenditure incurred on external training courses provided to their employees.

The external training courses must be delivered by entities registered in Australia and are required to be provided to employees either in Australia or online.

Expenditure incurred between 7.30pm (AEDT) on 29 March 2022 and 30 June 2022 will be eligible to have the 20% boost claimed next year on the 2023 income tax return. Expenditure incurred between 1 July 2022 and 30 June 2024 will have the boost included in the 2023 and 2024 income tax returns.

Small Business Technology Investment Boost

Effective from 29 March 2022 to 30 June 2023

Small businesses will be able to deduct an additional 20% of expenditure incurred to support digital adoption, including on the purchase of depreciable assets. Eligible expenditure includes portable payments devices, cyber security systems and subscriptions to cloud-based services. An annual cap of $100,000 will apply in each qualifying income year.

Expenditure incurred between 7.30pm (AEDT) on 29 March 2022 and 30 June 2022 will be eligible to have the boost claimed next year on the 2023 income tax return. Expenditure incurred between 1 July 2022 and 30 June 2023 will have the boost included in the 2023 income tax return.

Modernisation of the PAYG Instalment Systems

Proposed to commence 1 January 2024

Companies will be able to choose to have their Pay As You Go (PAYG) instalments calculated based on current financial performance, extracted from business accounting software, with some tax adjustments.

The aim is to support business cash flow by ensuring instalments reflect current performance. The government will consult with affected stakeholders, tax practitioners and digital service providers to finalise the policy scope, design, and specifications of this measure.

Changes to TPAR Reporting of Contractor Payments

Effective from 1 January 2024

The Taxable payments annual report (TPAR) is required to be lodged by 28 August of each year by businesses in particular industries such as building and construction, cleaning, road freight, courier, information technology and security. The TPAR provides contractor payment details to the ATO for data tracking purposes.

From 1 January 2024, businesses will be able to report this TPAR data when preparing activity statements through its businesses accounting software.

The Government hopes this will result in more accurate and timely reporting, while lowering compliance costs for taxpayers.

Depreciation Changes for Intangible Assets

Effective from 1 July 2023

Small businesses can self-assess the depreciation rate on intangible assets rather than using the specified statutory rate. This choice can be made in relation to intangible assets the taxpayer starts to hold on, or after, 1 July 2023.

Intangible assets include patents, a registered design, copyright, licenses, in-house software

The taxpayer can recalculate the depreciation rate in later income years if the effective life is no longer accurate because of changed circumstances relating to the nature of the asset’s use or if the cost of the asset increases by at least 10% in a later income year.

Non-assessable COVID-19 Business Grants

Support payments tax-exempt for eligible business during 2021-22 income year

The Government has made the following state and territory grant programs provided during 2021-22 to eligible small business non-assessable, non-exempt income for income tax purposes:

• 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.

Temporary Full Expensing of Assets Not Extended

Current legislation effective until 30 June 2023.

An immediate deduction is currently available for small businesses for the cost of depreciating assets purchased after 7.30pm (AEDT) on 6 October 2020, and first used, or installed ready for use, by 30 June 2023.

The Budget has not extended this measure beyond 30 June 2023.

Loss Carry Back Tax Offset Not Extended

Current legislation effective until 30 June 2023.

Small businesses operating through a company can carry back losses incurred in the 2020 to 2023 income years to the 2019 income year onwards, as long as:

• Losses carried back cannot be more than the earlier taxed profits
• The loss carry-back amount must not generate a franking account deficit.

Those companies that elect to apply this measure will receive a tax refund in the loss-making year equal to tax paid in earlier profitable years.

The Budget has not extended this measure beyond 30 June 2023.

Single Touch Payroll Data to be Shared with other Government Agencies

Data sharing between the ATO and State Governments

Under Single Touch Payroll (STP), employers are required to report its employees’ salaries and wages, PAYG withholding and superannuation information through streamlined reporting software, directly to the ATO each pay period. This provides up to date earnings information for all taxpayers throughout the year, accessible by the taxpayer through their MyGov login and the ATO for data matching purposes.

The Government has committed to developing IT infrastructure to allow STP data to be shared on a continuing basis between the ATO and State and Territory Revenue Offices.

Corona Virus Tests

Tax deductible in the 2021-22 Income Year

The government restated its intention to introduce legislation to ensure that Coronavirus tests (including PCR and Rapid Antigen Tests) are tax deductible when purchased for work-related purposes. By making these tests tax deductible, it also ensures that businesses will not be subject to fringe benefits tax (FBT) on tests that are provided to employees for this purpose. This measure is expected to be applicable from the beginning of the 2021/22 tax year