Walker Wayland - Perth Accountants

Mar 2022 4 Minutes

Small Business Measures

Article part of 2022-23 Federal Budget update

A number of measures were announced to support businesses with a turnover of less than $50 million. These include:

 

Technology and Investment Boost for Small Businesses

A key focus of the Government in the 2023 Budget has been on small businesses. Importantly, a “small business” for the purposes of these changes is an entity with an aggregated turnover of less than $50 million.

To address skills shortages and investment requirements in digital technology, the Government has announced a temporary deduction equivalent to 120% of expenditure incurred on digital adoption and training employees for small businesses.

Technology Investment

Small businesses will be eligible for an additional 20% deduction for expenditure and purchase costs of depreciable assets on portable payment devices, cyber security systems, adoption of e-invoicing and subscriptions to cloud based services.

There will be an annual cap of $100,000 for expenditure eligible for the additional 20% deduction. The measure will be applicable for costs incurred between 7:30 pm (AEDT) on 29 March 2022 until 30 June 2023.

The 20% boost on 2022 expenditure will only be claimable in the 2023 income tax return. For the 2023 year, a deduction equivalent to 120% will be claimable in that year’s return itself.

Skills and Training

An additional 20% deduction will be claimable for small business entities for costs incurred in providing external training courses for employees. Eligible expenditure must be provided to employees in Australia or online and delivered by entities registered in Australia.

There appears to be no cap on this expenditure and it will be applicable for costs incurred between 7:30 pm (AEDT) on 29 March 2022 until 30 June 2023. Similar to the technology investment boost measure, expenditure incurred in the 2022 year will only be claimable in the 2023 year.

These are welcome measures aimed at not only supporting SME businesses but also addressing skills shortages and investment requirements in digital technology.

The main deficiency in these measures is the delay in the additional 20% deduction for costs incurred in the 2022 year. Businesses incurring eligible expenditure between now and 30 June 2022 will only be able to claim the 20% boost in the 2023 tax return.

This return could be lodged as late as May 2024. This timing issue has similarities to the loss carry back offset previously announced – an offset for the 2020 year could only be claimed in the 2021 income tax return. This timing issue was criticised by the profession. Unfortunately, the Government has not changed this approach for the 20% boost for the 2022 year.

 

COVID-19 Test Expenses

Confirming what was announced by the Government in early February, the Budget has announced that the costs of taking either a PCR or RAT test in order to attend work will be tax deductible for individuals from 1 July 2021 and will be exempt from FBT for business that provide these tests to their employees.

This measure clarified concerns for many businesses that required their employees to take regular COVID tests, either at the employee’s own expense or where the employer funded the test and now provides certainty on this issue.

 

Sharing of Single Touch Payroll information with the States

Most employers are now familiar with the STP reporting obligations for their employee’s wages and superannuation.  The Government proposes to invest in IT infrastructure upgrades to enable STP information to be shared with State and Territory revenue authorities.  This will clearly be to enable States and Territories to reconcile Payroll Tax returns with wage information reported through STP and may therefore see an increase in compliance activities by the various Payroll Tax authorities.

It is hard to estimate the timeline for this given it requires both Federal and State & Territory Governments to undertake IT infrastructure upgrades to enable the data matching to occur.

 

Temporary COVID Measures coming to an End

The Government previously announced two significant temporary tax measures to assist businesses during the pandemic in the Loss carry back and the Temporary Full Expensing rules.

Both of these measures were recently extended through to 30 June 2023, however the Government has not chosen to extend them further such that they will end from 30 June 2023.

Of particular interest will be what the asset threshold will revert to for the instant asset write off rules from 1 July 2023 given the multiple temporary thresholds introduced in recent years, as distinct from the originally legislated $1,000 asset limit.

 

Employee Share Scheme changes

Changes were announced to the Corporations Act that allow unlisted companies relief from providing a disclosure document to employees when offering shares or options in employer companies.

Currently unlisted companies can access this relief when they offer shares or options for interests for no more than $5,000 in value per employee per year.  This announcement increases that threshold from $5,000 to $30,000.

Whilst some may have hoped this was a tax concession, it’s not, but merely an extension of the ASIC relief order on disclosure documents required to be provided to employees.