Last month’s 2021 Federal Budget was predominantly a spending budget to maintain the momentum of the recovery of the Australian economy following the pandemic.

The main revenue initiatives that impact immediately are:

• An extension of the Capital Asset Immediate Deduction provisions for another year until 30 June 2023.
• An extension of the Loss Carry Back provisions for another year, also until 30 June 2023
• Superannuation contributions by employers on behalf of their employees will increase to 10 per cent from July 1.

There have been no changes to the individual income tax rates for the 2021 financial year.

Small and Medium Businesses

From 1 July 2020, the small business turnover threshold increased from $10 million to $50 million.

This means small and medium businesses can access the concessional prepayment rules and the immediate deduction for startup costs.

From 1 April 2021, the FBT exemptions for car parking benefits and for the provision of multiple work related electronic devices extends to entities with a $50 million turnover.

From 1 July 2021, the balance of the small business entity (SBE) concessions extend to medium enterprises, including concessional GST and PAYG instalments, small business trading stock, a two-year amendment period and concessions for customs and excise reporting.

However, thresholds for the small business CGT concessions remains at $2 million turnover or $6 million net asset test and small business tax discount has a $5 million turnover threshold.

Capital Asset Immediate Deduction

One of the initiatives from the 2020 Budget was the introduction of the capital asset immediate deduction.

Under this scheme, entities that are carrying on a business with an aggregated turnover of less than $5 billion (there is an alternative test for companies that do not satisfy this threshold) are entitled to claim an immediate deduction for the purchase and installation of new qualifying assets, and an immediate deduction for capital improvements to older assets (ie many amounts that are not deductible repairs).

The assets must be depreciable under Division 40 (general depreciation rules) and are subject to various exclusions.

The assets must be first held by the entity between 6 October 2020 and 30 June 2023, and be used or installed ready for use on or before 30 June 2022. The Government has proposed to extend this to 30 June 2023, although legislation has not yet been released.

The deduction is allowable in the year in which the asset is used or installed ready for use.

For assets purchased between 6 October 2020 and 30 June 2021, the immediate deduction is allowable only where the asset is used or ready for use by the entity no later than 30 June 2021.

Loss Carry Back Rules

Legislation has been passed allowing companies with an aggregated turnover of less than $5 billion to elect to carry back income tax losses in the financial years ending 30 June 2020, 30 June 2021 and 30 June 2022. The Government has also proposed extending these rules to 30 June 2023 but legislation is yet to be introduced.

Where an election is made to carry back a loss, the company receives a refundable income tax offset equivalent to the amount of the tax loss multiplied by the relevant income tax rate.

The election allows income tax losses from 30 June 2020 to 30 June 2022 to be carried back for a refund of income tax paid in the 30 June 2019 to 30 June 2022 income tax years.

The amount of the losses able to be carried back is capped at the lesser of:

• The tax affected tax losses
• The income tax paid
• The franking account balance for the year of the election.

Note however that by making the election and receiving a refund of income tax paid in an earlier year, the company will receive a debit in its franking account equivalent to the amount of the refund.

This may restrict the company’s ability to pay franked dividends to its shareholders.

Superannuation

The rate for superannuation contributions by employers on behalf of their employees under the Super Guarantee for the year ended 30 June 2021 is 9.5 per cent.

The rates are scheduled to increase over the next few years. For the year ended 30 June 2022, the rate increases to 10 per cent, meaning that contributions made in relation to salary and wages paid on or after 1 July 2021 will be subject to the higher 10 per cent rate.

The contributions rate is scheduled to increase by 0.5 per cent per year until it reaches 12 er cent from 1 July 2025. This may be subject to change.

Employers must make superannuation guarantee contributions for their employees on a quarterly basis within 28 days after the end of each quarter (September, December, March and June).

This document is not exhaustive and your individual circumstances must be considered.