Federal Budge 2021: $20bn tax break package for business as new umpire announced

Virtually every business in the nation will benefit from a huge tax break package, while a new umpire will mediate debt disputes between the ATO and some companies.

Australian businesses will benefit from a $20bn tax-break package. Picture: Supplied

A $20 billion-plus tax break package covering virtually every business in the nation will help “unleash a further wave of investment’’ as the economy roars back to life, Treasurer Josh Frydenberg says.

With business conditions at record highs, the government has pledged $20.7bn – in its biggest single revenue concession – to extend the temporary full expensing and temporary loss carry back provisions by a year.

The temporary full expensing provisions, which were expanded last year, will now allow all businesses with a turnover of less than $5bn to instantly write off asset purchases of any value bought between October 6 last year and June 30, 2023.

My Frydenberg said the expanded scheme had already “seen their spending on machinery and equipment increase at the fastest rate in nearly seven years’’.

It would mean that a “tradie can buy a new ute, a farmer a new harvester and a manufacturer expand their production line,’’ he said.

The loss carry back scheme will allow eligible companies to carry-back tax losses from the 2022-23 financial year to offset previously taxed profits as far back as the 2018-19 income year, the Budget documents say.

The federal government has pledged $20.7bn to extend the temporary full expensing and temporary loss carry back provisions by a year. Picture: Supplied

Mr Frydenberg said a new umpire would also be introduced, to mediate in disputes over debt between the Australian Taxation Office and businesses with a turnover of less than $10m.

“Tonight we provide small business with peace of mind that an independent umpire will stand between them and the ATO when it comes to debt recovery actions,’’ Mr Frydenberg said.

“We will take these disputes out of the courts and let small business get on with what they do best. Under the Coalition, small business will always be stronger.’’

With the issue of ATO tax debt assessments long decried by the small business community the measure will be well received.

On the intellectual property front, a “patent box” will be introduced, designed to encourage business to do research and remain headquartered in Australia.

“From 1 July 2022 the patent box will tax income derived from Australian medical and biotech patents at a 17 per cent effective concessional corporate tax rate,’’ the Budget documents state.

“Normally corporate income is taxed at 30 per cent or 25 per cent for small and

medium companies.’’

The Treasurer said the patent box would apply to the medical and biotech sectors “and we will consult on expanding it to the clean energy sector’’.

Industry sectors which have not been able to adapt to or recover from the COVID-19 pandemic will also be helped, with the Treasurer releasing a support plan for aviation, the arts, and education providers.

The Budget documents state the arts sector will get $125m to kick‑start new productions, festivals and events, with about 230 projects to be supported, and $20m will go towards keeping independent cinemas open across the nation.

Independent education providers will receive $53.6m to fund grants of up to $150,000 to invest in infrastructure, expertise and new teaching solutions.

These measures will be welcomed by organisations such as the Australian Chamber of Commerce and Industry, which has been advocating for targeted support for these sectors following the end of JobKeeper payments on March 28.

Treasurer Josh Frydenberg (L) said new umpire would be introduced to mediate in disputes over debt between the Australian Taxation Office and businesses with a turnover of less than $10m. Picture: Getty Images

The tax rules around employee share schemes will also be simplified, removing cessation of employment as a taxing point, foregoing $550m in government revenue out to 2024-25.

Industry specific measures include the Digital Games Tax Offset which provides a 30 per cent refundable offset for qualifying expenditure, and the Excise Refund Scheme which will give brewers and distillers full remission (up from 60 per cent) of any excise they pay up to a cap of $350,000 each year.

The government’s commitment to deregulation continues also, with an extra $134.6m set aside in the Budget to reduce the regulatory burden for businesses interacting with government via measures such as digitisation and new technology to navigate modern awards.

The Digital Solutions – Australian Small Business Advisory Services program will also receive a further $12.7m in 2021-22.

The tax rate for businesses with a turnover of less than $50m will reduce to 25 per cent next financial year, however that is not a new measure.

KEY CHANGES

Over 99 per cent of businesses, employing more than 11 million workers, can write off the full value of any eligible asset they purchase

– The measure, now extended by a year, has seen business spending on machinery and equipment increase at the fastest rate in nearly 7 years

– The two major business tax breaks are forecast to boost GDP by about $7.5 billion in 2021-22 and $8 billion in 2022-23

– The loss carry back measures allow businesses to offset previously taxed profits as far back

as 2018-19

– The government says the measures “are estimated to apply to around $320 billion worth of investment’’