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Federal Budget May 2021
There is no surprise that the Government’s 2021 Budget saw a focus on spending to kick start the economy, with an estimated $106 billion deficit for the 2022 year.
Some of the key measures revealed were:
Extension of Loss Carry Back Rules
Eligible entities will now be able to carry back and utilise tax losses from the 2023 income year to offset previously taxed profits as far back as the 2019 income year when they lodge their 2023 income tax return.
These rules are somewhat limited in that they only apply to ‘corporate tax entities’, being companies, corporate limited partnerships and public trading trusts. Unfortunately these rules do not apply to general trading trusts.
Temporary Full Expensing Extension
The Government is extending the temporary full expensing of depreciating assets until 30 June 2023.
Eligible businesses with aggregated annual turnover of less than $5 billion can now deduct the full cost of eligible depreciable assets of any value, acquired from 7:30pm AEDT on 6 October 2020 and first used or installed ready for use by 30 June 2023.
We note that for small business entities (aggregated annual turnover of less than $10 million) that have elected to apply the simplified depreciation rules under Small Business write-offs there appears to be no choice to deduct the cost of assets acquired.
For some entities we have noted a reference in commentary to an ability to opt in or opt out on an asset by asset basis. Watch this space!
Employee Share Scheme (ESS) Changes
Cessation of employment will soon no longer be a taxing point for tax-deferred ESS schemes.
The change will apply to ESS interests issued from the first income year after Royal Assent of the amending legislation.
Currently, under a tax‑deferred ESS, where certain criteria are met employees may defer tax until a later tax year (the deferred taxing point).
The deferred taxing point will now be the earliest of:
· in the case of shares, when there is no risk of forfeiture and no restrictions on disposal;
· in the case of options, when the employee exercises the option and there is no risk of forfeiting the resulting share and no restriction on disposal; and
· the maximum period of deferral of 15 years.
Superannuation
A number of interesting changes but for the most part are expected to apply from the 2023 financial year.
Link to Budget measures summary
https://budget.gov.au/2021-22/content/bp2/index.htm
SME Loan Scheme
The Loan Scheme for Small to Medium Enterprises, aimed at enhancing lenders’ ability to provide cheaper credit, will be broadened as follows:
· Maximum loan amount will be $5 million
· Maximum interest rate of 7.5%
· Government will now guarantee 80% of the loan
This extension is only available for entities with turnovers of up to $250m and who received Jobkeeper payments from 4 January 2021 and 28 March 2021.
Treasury Website for Loan Scheme
https://treasury.gov.au/coronavirus/sme-recovery-loan-scheme
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