The Treasurer delivered the Federal Budget on Tuesday 11 May 2021.
The Federal Government says the 2021-22 Federal Budget maintains the momentum of Australia’s economic recovery. It supports jobs and guarantees services and is the next stage of the Government’s economic plan to secure Australia’s recovery.
These are the major tax changes impacting on SME's:
Extension of temporary full expensing of capital assets
The temporary fully expensing of capital assets for businesses with an aggregated turnover of less than $5 billion is to be extended from 30 June 2022 to 30 June 2023.
Extension of temporary carry-back of company tax losses
The temporary carry-back of company tax losses will be extended to tax losses made up to the 2022-23 year. Losses may be carried back to any year up to the 2018-19 year.
Removing the $450 a month earnings threshold for superannuation guarantee (SG) eligibility
The Government will remove the current $450 per month minimum income threshold, under which employees do not have to be paid SG contributions by their employer.
The measure will have effect from the start of the first income year after Royal Assent of the enabling legislation, which the Government expects to have occurred prior to 1 July 2022.
Debt recovery for small businesses
Small business entities (including individuals carrying on a business) with an aggregated turnover of less than $10 million per year will be able to apply to the Small Business Taxation Division of the Administrative Appeal Tribunal (AAT) to pause or modify ATO debt recovery actions such as garnishee notices and recovery of general interest charges and related penalties, where the debt is being disputed in the AAT.
Currently small businesses are only able to pause or modify ATO debt recovery actions through the court system which is usually costly and time consuming.
This measure will take effect from the date of Royal Assent of the enabling legislation.
Tax exemption for qualifying storm and flood grants
The Government will provide an income tax exemption for qualifying grants made to primary producers and small businesses affected by the storms and floods in Australia.
Qualifying grants are Category D grants provided under the Disaster Recovery Funding Arrangements 2018, where those grants relate to the storms and floods in Australia that occurred due to rainfall events between 19 February 2021 and 31 March 2021. These include small business recovery grants of up to $50,000 and primary producer recovery grants of up to $75,000. The grants will be made non-assessable non-exempt income for tax purposes.
Extension of low and middle income tax offset (LMITO)
The LMITO is to be extended to the 2021-22 year. It provides for a maximum offset of $1,080 for taxpayers with taxable income from $48,000 to $90,000. A lesser LIMITO offset is available to taxpayers with a taxable income below $48,000 or taxable incomes from $90,000 to $126,000.
Other tax measures
There is a raft of other tax measures in the Federal Budget impacting on SME's including:
- the Medicare levy thresholds have been increased for the 2020-21 year.
- the $250 exclusion for self-education expenses will be removed.
- The residency test will be modernised with a primary 183 day “bright line” test and a secondary measurable criteria test.
- The ESS (employee share scheme) rules are to be amended so that ceasing employment is not a taxing point. This may help with SME employee share schemes as well as larger company share schemes.
