unpacking the federal budget positive cash impact for business
Post on 17-Mar-2022
1 Views
Preview:
TRANSCRIPT
PANEL OF EXPERTS
MARIANA VON-LUCKENPARTNER, TAX CONSULTING
HLB MANN JUDD
P: +61 (0)2 9020 4095
E: mvonlucken@hlbnsw.com.au
ALEX KINGDIRECTOR, TAX CONSULTING
HLB MANN JUDD
P: +61 (0)2 9020 4345
E: aking@hlbnsw.com.au
AGENDA
Instant asset write-off
Q&A
Loss carry back rules
Corporate tax rateALEXKING
R&D Tax Incentive
JobKeeper 2.1MARIANA
VON-LUCKEN
Expanded access to small business concessions
JobMaker
Corporate tax residency
What is it?
INSTANT ASSET WRITE OFF – FULL EXPENSING
OF DEPRECIABLE ASSETS (FEDA)
Full deduction for cost of
eligible depreciable assets
(no cost limit)
Used in a business in
Australia
For assets first held between 6
October 2020 and 30 June 2022
Groups with up to $5bn in
“aggregated turnover” eligible
If under $50m turnover, wider application
➢ Can be second hand
➢ Can have committed before budget night
2020
INSTANT ASSET WRITE OFF – FULL EXPENSING
OF DEPRECIABLE ASSETS (FEDA)
Eligible assets
▪ Depreciating assets (Div40), subject to certain exclusions
▪ Used, or installed ready for use, for taxable purpose
▪ Cost of improving existing asset
▪ For entities with aggregated turnover < $50m only:
▪ Second-hand assets
▪ Assets with pre-existing commitment before 6 October 2020
Excluded assets
▪ Buildings and improvements (Div 43 capital works)
▪ Assets not used or located in Australia
▪ Assets in low value pools and software development pools
▪ Certain primary production assets
INSTANT ASSET WRITE OFF – FULL EXPENSING
OF DEPRECIABLE ASSETS (FEDA)
Existing pre-Budget investment incentives
Enhanced instant asset write-off (IAWO)
▪ Immediate deduction for cost of assets up to $150,000
▪ Applies to business with aggregated turnover < $500m
▪ Assets (new and second-hand) acquired between 12 March 2020 to 31 December 2020
▪ 2020-21 Budget extended period to 30 June 2021
Backing Business Investment (BBI)
▪ Immediate 50% deduction for cost of eligible asset at time of installation
▪ Applies to business with aggregated turnover < $500m
▪ New assets acquired between 12 March 2020 and first used or installed by 30 June 2021
Do you “hold” the asset for
tax ≠ ROU asset disclosures
Depreciable asset vs eligible for …
Instant asset write off (IAWO) and new full expensing of depreciating assets (FEDA)
Aggregated turnover
Date asset acquired
(IAWO) or first held
(FEDA)
Date asset first used or installed ready for use Cost threshold1
FEDA:
All businesses
< $5b
From 6 October 2020 By 30 June 2022 No limit
IAWO:
Large businesses
>$50m to < $500m
2 April 2019 to
31 December 2020
12 March 2020 to 30 June 2021 < $150,000
IAWO:
Medium businesses
>$10m to < $50m
2 April 2019 to
31 December 2020
2 April 2019 to before 12 March 2020
12 March 2020 to 30 June 2021
< $30,000
< $150,000
IAWO:
Small business entity
<$10m
From 1 January 2021 Practically, not relevant until after 30 June 2022 < $1,000
12 May 2015 to 31
December 2020
12 May 2015 to before 29 January 2019
29 January 2019 to 2 April 2019
2 April 2019 to before 12 March 2020
12 March 2020 to 30 June 2021
< $20,000
< $25,000
< $30,000
< $150,000
Before 12 May 2015 Before 12 May 2015 < $1,000
1. Subject to car limit ($59,136 for 2020-21)
INSTANT ASSET WRITE OFF
INSTANT ASSET WRITE OFF
Do you “hold” the asset for tax ≠ ROU
asset disclosures
Depreciable asset vs structural improvement
Decision to purchase asset
should be commercially
driven
Aggregated turnover –Consider foreign
associates
Review fixed asset register and systems
What if you drop into tax loss? Do
you become eligible for …
Planning considerations
TEMPORARY LOSS CARRY BACK RULES
WHAT IS IT?
A ‘refundable tax offset’ is available in FY21 or FY22
For corporate tax entities that incur a tax loss in FY20, FY21 or FY22
And paid income tax in FY19, FY20 or FY21
Provides cash flow support to companies that were previously in a tax
paying position but are now generating tax losses
TEMPORARY LOSS CARRY BACK RULES
Core Rules
Rule Explanation
Eligible losses Revenue losses incurred in FY20, FY21 and FY22 only (capital losses not eligible)
Eligible taxed profits income years FY19, FY20 and FY21
Year in which “loss carry back tax
offset” can be claimed
FY21 and FY22
Offset can only be claimed in 2021 and 2022 tax returns
Eligible entities ▪ Corporate tax entities only
▪ Entity must carry on a business
▪ Entity must have aggregated turnover less than $5 bn
Choice to carry back loss Entity can choose when and how much of the loss will be carried back
Tax return obligation Entity must have lodged a tax returns for claim year and previous 5 years
TEMPORARY LOSS CARRY BACK RULES
Limitations
• Tax refund is limited in two ways:
• Loss carried back cannot exceed earlier taxed profits; and
• Amount refunded cannot be more than franking account balance
• Following losses are eligible for the carry back:
• Capital losses
• Losses transferred to a tax consolidated group by a joining entity
• Losses generated as a result of excess franking offsets
• Refundable offset is based on corporate tax rate in loss year, not profit year
• ATO could offset refund against other amounts owing (e.g. PAYG withholding, GST, FBT)
TEMPORARY LOSS CARRY BACK RULES
Integrity measures
• General anti-avoidance rules (Part IVA)
• Specific anti-avoidance rule
➢Targets schemes where change in control of a company, and a purpose to obtain a loss carry back tax offset
stripped of assets /
profits and sold with franking credits
Startup business
uses shell to claim
carryback on startup tax losses
Sale of company
with a taxpaying
history
Are you continuing with the same
assets?ATO RED FLAGS
TEMPORARY LOSS CARRY BACK RULES
➢ Compare cash flow, franking and
other consequences of claiming loss
carry back offset amounts
➢ Carrying forward losses subject to
COT/SBT
Consider dividend payment plan
Impact on franking account balance?
Consider timing of deductions:
➢ Accelerated depreciation and
immediate deduction for asset
purchases
➢ Bring forward salary / directors fees
➢ Is aggregated turnover < $5bn?
➢ Was tax paid in FY19 / FY20 (actual) or
FY21 (forecast)
➢ Were tax losses incurred for FY20
(actual) or FY21 / FY22 (forecast)
➢ Estimate franking account balances at
end of FY21 and FY22
Planning considerations
EXAMPLE –
TEMPORARY LOSS CARRY BACK RULES
2019-20 2020-212018-19
• FY21 aggregated turnover of $60m
• On 30 June 2021 purchase concrete pump for $1m excl GST
• FY21 taxable income (before purchase) was $600k
➢ Tax payable $180k
• Under temporary FEDA, deduct cost of $1m in FY21
➢ Results in a tax loss of $400k
• FY19 taxable income of $400k
➢Tax paid of $120k
• Franking account balance of $120k
• Loss carry back tax offset:
➢$400k loss x 30% = $120k
Bogong Builders Pty Ltd (adapted from budget fact sheet)
Loss carried back results in $120k refund
CORPORATE TAX RATE
Do you “hold” the asset for
tax ≠ ROU asset disclosures
Depreciable asset vs eligible for …
Corporate tax rate
• No changes announced in Budget to corporate tax rate
• Non-base rate entities: remains 30%
• Aggregated turnover threshold remains at $50m
• Base rate entities: previously announced progressive reduction (no change)
➢ FY19 and FY20: 27.5%
➢ FY21: 26%
➢ FY22: 25%
• Corporate tax rate for base rate entities relevant for:
➢Maximum franking rate of dividends
➢ Loss carry back tax offset
EXPANDED ACCESS TO SMALL BUSINESS
CONCESSIONS
Do you “hold” the asset for
tax ≠ ROU asset disclosures
Depreciable asset vs eligible for …
Access to following concessions expanded to entities with aggregated
turnover up to $50m
Concession Start date
Immediate deduction for certain start-up expenses 1 July 2020
Immediate deduction for certain prepaid expenditure 1 July 2020
FBT exemption for car parking benefits 1 April 2021
FBT exemption for multiple work-related portable electronic devices 1 April 2021
Simplified trading stock rules 1 July 2021
Remit PAYG instalments based on GDP-adjusted notional tax 1 July 2021
Settle excise duty monthly on eligible goods 1 July 2021
Settle excise-equivalent customs duty monthly on eligible goods 1 July 2021
Two-year amendment period 1 July 2021
Simplified accounting method determination for GST purposes 1 July 2021
CHANGE TO CORPORATE TAX
RESIDENCY
Depreciable asset vs eligible for …
Proposed change to corporate tax residency
▪ Foreign incorporated company will only be resident if it has ‘significant economic connection’ to Australia
▪ Core commercial activities undertaken in Australia, and
▪ Central management and control in Australia
▪ Returns corporate residency rules to status quo before the Bywater case ruling
R&D TAX INCENTIVE - FACTS
Innovation and Science Australia – Actual
business R&D Expenditure
$11.92B
R&D
Spent
2018/19
$17.32B
R&D
Spent
2015/16
30% reduction
SME 10,817 Reg SME 11,062 Reg
TIMELINE
Sept 2018
Dec 2019
6 Feb 2020
6 Oct
2020
May 2018
Government
announced
changes in 2018
Federal budget
Bill introduced
Why ?Budget R&D new
Legislation Start 1
July 2021, above
Bill repealed
Revised Bill
introduced
Update on the Treasury Laws Amendment (Research and Development Tax Incentive) Bill 2019 (Cth)
BENEFITS
Current Refundable Tax Offset < $20m Turnover
Annual Turnover R&DTI
offset
Rate (%)
Company
Tax Rate
(%)
Net Benefit Expenditure Cap
0-$20m (YE 2020) 43.5 27.5 16.0 cents $100m
0-$20m (YE 2021) 43.5 26.0 17.5 cents $100m
0-$20m 43.5 30.0 13.5 cents $100m
BENEFITS
Current Non - Refundable Tax Offset > $20m Turnover
Annual Turnover R&DTI
offset
Rate (%)
Company
Tax Rate
(%)
Net Benefit Expenditure Cap
$20m - $50m 38.5 27.5 13.5 cents $100m
> $50m 38.5 30.0 8.5 cents $100m
HOW DOES IT WORK?
Carry on your R&D in a company
Ownthe IP
Bear the financial burden
Spend> $20k
Have core/ supportingactivities
Track & document
core activities
CORE DETAILS
Experimental Activities whose
outcome cannot be known in
advance; and
Need to apply a systematic progression
of work based on the principles of
established science principles; and
Proceed from hypothesis to
experiment, observation and
evaluation, and lead to logical
conclusions?
Conducted for the purpose of generally
new knowledge by creating a new or
improved product/material/process/device
or services
R&D CHANGES FROM 1 JULY 2021
Refundable Tax Offset – Corporate Rate + 18.5%
Annual Aggregated Turnover R&DTI offset Rate (%) Company Tax Rate (%) Net Benefit Cap
0-$20m(30 June 2022) 43.5 25 18.5 cents No Cap
R&D CHANGES FROM 1 JULY 2021
Non-deductable Offset
(Entities with Annual Aggregated Turnover exceeding $20M)
Overall R&D intensity rate R&D tax offset premium account
0 to 2% • 8.5% for R&D expenditure between 0-2% R&D intensity (The first 2%)
Over 2% • 16.5% for R&D expenditure over 2% R&D intensity
R&D CHANGES FROM 1 JULY 2021
Current Non - Refundable Tax Offset > $20m Turnover
Tier Intensity range R&D premium Notional deductions applied Offset amount
Tier 1 0-2% 8.5% $20m $7.7m
Tier 2 >2% 16.5% $130m $60.45m
Excess N/A Nil $10m $3m
Totals: $160m $71.15m
30 June 2022 year end R&D spend $160m (R&D intensity of 15%)
Normal spend $1B T/O greater than $50M so 30% rate
R&D CHANGES FROM 1 JULY 2021
Non-deductable Offset under New legislation from 1 July 2021
(Entities with Annul Aggregated Turnover exceeding $20m)
R&D expenditure, which represents, as a proportion of total expenses*: 0%- 2% Over 2%
Net benefit to applicant per dollar spent 8.5 cents 16.5 cents
Effective Tax offset amount for;
• Companies with 25% Tax Rate 33.50 cents 41.5 cents
• Companies with 30% Tax Rate 38.50 cents 46.5 cents
*Calculated as R&D expenditure / total expenses
Expenditure limit increased from $100m to $150m
Jobkeeper
27 September 2020 3 January 2021 28 March 202130 March 2020
JobKeeper 1 JobKeeper 2
$1,500 per
fortnightly
$1,200 | $750
per fortnight
$1,000 | $650
per fortnight
JOBKEEPER FORTNIGHTLY
PAYMENT RATES
JobKeeper PeriodTier 1:
Higher rate
Tier 2:
Lower rate*
30 March 2020 to 27 September 2020 $1,500 -
28 September 2020 to 3 January 2021 $1,200 $750
4 January 2021 to 28 March 2021 $1,000 $650
* Part time workers
JOBKEEPER v2.1
JobKeeper Period Relevant BAS (quarterly) BAS compared to
28 September 2020 – 3 Jan 2021 September 2020 September 2019
4 Jan 2021 – 28 Mar 2021 December 2020 December 2019
JobKeeper Period BAS Lodgement date Self-assessment date for JobKeeper eligibility
28 Sep 2020 – 3 Jan 2021 28 Oct 2020 Mid-Oct 2020 (as per Treasury fact sheet)
4 Jan 2021 to 28 Mar 2021 28 Feb 2021 Mid-Jan 2021 (as per Treasury fact sheet)
Period Full Rate per fortnightly Less than 80hrs worked per fortnight rate
28 Sep 2020 – 3 Jan 2021 $1,200 $750
4 Jan 2021 – 28 Mar 2021 $1,000 $650
JOBKEEPER FORNIGHTLY
PAYMENT RATES
Hours worked by
the individual in the
reference period
30 Mar 2020 to
27 Sep 2020
28 Sep 2020 to
3 Jan 2021
4 Jan 2021 to
28 Mar 2021
80+hours
$1,500per fortnight
$1,200Per fortnight
$1,000per fortnight
<80Hours
$750Per fortnight
$650per fortnight
EMPLOYER’S PERSPECTIVE
RECEIVING JOBKEEPER 2 PAYMENTS
JobKeeper fortnightWage condition deadline for
every eligible employee
Month of payment by
ATO (once turnover
reported)
Monthly JobKeeper payment per
eligible employee
Higher Rate Lower Rate
28 September–11 October
12–25 October31 October 2020 (transitional) November 2020 $2,400 $1,500
26 October–8 November
9–22 November
8 November 2020
22 November 2020December 2020 $2,400 $1,500
23 November–6 December
7–20 December
6 December 2020
20 December 2020January 2021 $2,400 $1,500
21 December–3 January
4–17 January
18–31 January
3 January 2021
To be advised
To be advised
February 2021 $3,200 $2,050
1–14 February
15–28 FebruaryTo be advised March 2021 $2,000 $1,300
1–14 March
15–28 MarchTo be advised April 2021 $2,000 $1,300
NO CHANGE TO OTHER RULES
• meaning of ‘eligible employee’ (noting new 1 July 2020 employment test) and ‘eligible
business participant’
• requirement for employers to meet the wage condition
• specified percentage (DIT test) — 15% | 30% | 50%
• special rules relating to service entity arrangements
• ability of ACNC-registered charities to elect to exclude government grants from turnover
• enrolment process
• timing of monthly payment by the ATO in arrears
• monthly reporting of turnover
• rule that prevents more than one employer claiming for same employee
• tax treatment of JobKeeper payments
BASIC OR ALTERNATIVE TESTS
Basic Test• actual GST Turnover for the turnover test period quarter has declined by more
than 30% or 50% (depending on turnover).
• compare December 2020 quarter to December 2019 quarter.
Most relevant alternative tests • substantial increase in turnover test
• irregular turnover test
Current GST turnover is the amount of your sales except for the following:
• the GST you included in sales to your customers (if any)
• sales that are input taxed sales (for example, bank interest, sale of shares, residential rental
income)
• sales not connected with an enterprise that you carry on (for example, sale of private car)
• sales that are not made for payment (unless a taxable supply to an associate)
• payments for no supply (for example, JobKeeper payments)
• sales not connected with Australia, for example
o sales of services made through a business you carry on outside Australia
o sales of goods purchased and sold from a place outside Australia
o sale of real property situated outside Australia.
WHAT IS GST TURNOVER?
ALTERNATIVE DECLINE IN
TURNOVER TESTS
Business
commenced
The Commissioner’s current legislative instrument (issued 23 April 2020) sets out 7 alternative
decline in turnover tests where there is no appropriate relevant comparison period
1 Business acquisition
or disposal
2 Business
restructure 3
Business had
substantial increase in
turnover
4 Business affected by
drought or natural
disaster
5 Business has an
irregular turnover 6
Sole trader or small
partnership with
sickness, injury or leave
7+ Treasurer’s legislative instrument — modified test in s 8A for
service entity arrangements
Business Participation Entitlement Still valid
➢ consider work test
JOBKEEPER v2.1 Summary
What you need to do
Period From 4 January to 28th March 2021
➢ need to Reassess again
➢ if JobKeeper v1 applied, Actual GST turnover for the
December quarter 2020 has decreased by the
relevant amount compared to December quarter 2019
Reduction in payment rate to
➢ $1,000 per fortnight work more than 80hrs per week
➢ $650 per fortnight work less than 80hrs per week
JOBMAKER CREDIT
From 7 October 2020
• new jobs created from 7 Oct 2020 to 6 Oct 2021
• attract Jobmaker hiring credit for up to 12 months from the date the new position is created
• eligible employers able to claim either $100 or $200 a week for each additional eligible
employee hired
• baseline year 30 Sept 2020 for head count
• new employees not fall in turnover required
Criteria - to be eligible Employee
• employee must have been on JS/YA or Parenting payment for at least one of the previous
three months at the time of hiring to be claimed quarterly in arrears, by employer, from 1
Feb 2021.
• commenced employment between 7 Oct 2020 and 6 Oct 2021
• eligible employee aged between 16 to 29 years old for $200 per week
• eligible employee aged between 30 to 35 year old for $100 per week
• worked at least 20hrs on average per week
• applicable to part-time, full-time and casual employees – 20 hr week
Additional Criteria - additional job created from 7 Oct 2020
• increase in headcount from 30 Sept 2020; and
• increase in payroll tax for the reporting period , compared to the three months to 30 Sept
2020
JOBMAKER CREDIT
Employer Eligibility
• need to have an ABN
• up to date with tax lodgement
• reg for PAYGW
• reporting STP
• meet the additional criteria
• claiming in respect of eligible employee and
• have kept adequate records of the paid hours worked
• excludes Government departments
• excludes entities on JK
Newly established business
• no employees at 30 Sept are able to claim
• minimum baseline headcount is one, applies to subsequent
employees
JOBMAKER CREDIT
Action to Take
➢ check you are eligible employer
➢ track how many employees full time/part time/casual at 30 Sept
➢ track new employees or employee between age range
➢ don’t need to reg at time of hire
➢ reg opens in portal from 7th Dec 2020
➢ have 3 months to submit claims
➢ first reporting period of 7/10/2020 to 6/1/2021
➢ submit claims from 1 Feb 2021, should get money in Feb 2021
➢ paid 3 months in arrears, paid to employer
➢ receive $100 per week of new employee for 12months each quarter in
arrears – aged 30 to 35 years old at time of employment
➢ receive $200 per week of new employee for 12months each quarter in
arrears – aged 16 to 29 years old at time of employment
➢ at time of hire employee fills out nomination form – employer keeps
JOBMAKER CREDIT
Employer Head Count/Payroll Commentary
Baseline
30 September 2020
Payroll July - September
2
$30,000
Age 16 to 29 - $200 per week
Age 30 to 35 $100 per week
First relevant quarter
7 October 2020 – 6 June 2021
Payroll October - December
4
$60,000
2 new staff - in Oct 2020
• Emma aged 28 years - $200 per week
• Jessica aged 31 years - $100 per week
• Wage > 20 hrs average per week for the
quarter
Need nomination forms Enrol in Feb 2021 to get Jobmaker
Paid in Feb 2021
TALK TO US
If you have any further questions, or if you require assistance please
feel free to contact :
Poll Question
• I would like someone from HLB Mann Judd to contact me regarding the
following…
MARIANA VON-LUCKEN
PARTNER, TAX CONSULTING
HLB MANN JUDD
P: +61 (0)2 9020 4095
E: mvonlucken@hlbnsw.com.au
ALEX KING
DIRECTOR, TAX CONSULTING
HLB MANN JUDD
P: +61 (0)2 9020 4345
E: aking@hlbnsw.com.au
top related