BUDGET – Wrap for Business
The Budget was relatively quiet on the business front this year, with only a few notable measures:
Full Expensing Extended
Temporary full expensing will now be available until 30 June 2023. It was originally due to end 12-months earlier on 30 June 2022. Temporary full expensing allows eligible businesses with aggregated annual turnover or total income of up to $5 billion to deduct the full cost of eligible depreciable assets. Assets must be acquired from 7:30pm AEDT on 6 October 2020 and first used or installed ready for use by 30 June 2023.
The 12-month extension will provide eligible businesses with more time to access the incentive, including projects that require longer planning times and those affected by COVID-19 related supply disruptions. It assists cashflow by enabling businesses to claim depreciation deductions immediately, rather than potentially having to depreciate assets over a number of years.
Temporary Loss Carry-Back Expanded
Temporary loss carry-back will also be extended by one year. This will allow eligible companies to carry-back tax losses from the 2022-23 income year to offset previously taxed profits as far back as the 2018- 19 income year.
Companies with aggregated annual turnover of up to $5 billion can apply tax losses incurred during the 2019-20, 2020-21, 2021-22 and now the 2022-23 income years to offset tax paid in 2018-19 or later years. The tax refund will be available to companies when they lodge their 2020-21, 2021-22 and now 2022-23 tax returns.
ATO Power to Pause Debt Recovery Action
In a little publicised but welcome announcement made in this year's Budget, taxpayers who are indebted to the ATO but who have a dispute over their assessment at the AAT, will be able to apply to the AAT to have ATO debt recovery action paused or modified. The proposition is that recovery action would be stayed until the underlying dispute is resolved by the AAT.
The announcement is silent as to what happens where a taxpayer is unsuccessful before the AAT and decides to appeal to the Federal Court – presumably, the government considers that taxpayers with the means to pursue that avenue will be able to make their own arrangements with the ATO. The ATO has for many years allowed most taxpayers to pay only 50% of the tax in dispute in the case of unresolved objections or appeals, although legally the full amount shown on the notice of assessment is payable by the due date.
This has applied even where the amounts involved are quite large. The ability to defer the full amount of tax in dispute for small businesses represents a significant improvement over this practice, and also takes the decision out of the hands of the ATO. These new powers will apply only to small business entities – i.e. individuals and other entities with an aggregated turnover of less than $10 million per year. Taxpayers can apply to the AAT for a pause/ modification in relation to appeals that are lodged with the AAT from the date of Royal Assent of the relevant legislation.