Australia

Corporate tax rate cuts to proceed

The planned reduction in the corporate tax rate for ‘base rate entities’ to 25% will proceed for the 2022 income year onwards.

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The corporate tax rate for all other entities will remain at 30%.

 A corporate entity will be a base rate entity if:

  • The aggregated turnover for the relevant income year is less than the specified threshold ($50 million for the 2019 and later income years), and
  • The ‘base rate entity passive income’ for the income year is no more than 80% of the company’s assessable income for the income year.

SME Recovery Loan Scheme

The Government will implement the SME Recovery Loan Scheme to continue to support the economic recovery of businesses that received JobKeeper, and businesses affected by the March 2021 NSW floods.

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To be eligible, businesses (including sole traders and not-for-profit organisations) must have turnover under $250 million, and either:

  • Received JobKeeper Payments between 4 January 2021 and 28 March 2021, or
  • Were located or operating in an area that has been disaster declared as a result of the March 2021 NSW floods and were negatively economically impacted.

The Government will provide participating lenders with a guarantee for 80% of secured or unsecured loans of up to $5 million for a term of up to 10 years. Interest rates will be capped at 7.5% (with some flexibility for variable rate loans).

Loans can be used by the SME for a broad range of business purposes, including to support investment and refinancing existing loans, however there are some limitations such as the loan cannot be used to purchase residential property. Lenders will be able to offer borrowers a repayment holiday of up to two years (although interest will continue to accrue during this time).

This measure builds on the previous Coronavirus SME Loan Guarantee Schemes. Businesses that received loans under the previous phases of the scheme may still apply for additional funds under the current iteration.

Loans will be made available from 1 April 2021 until 31 December 2021.

Increased powers for the Administrative Appeals Tribunal in relation to small business taxation decisions

To assist struggling small businesses, the Administrative Appeals Tribunal (‘AAT’) will be given extended powers to pause or restructure ATO debt recovery actions.

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Taxpayers filing an application before the Small Business Taxation Division (SBTD) will be able to ask for debt recovery action taken by the ATO to be put on hold or modified so they can continue to carry on their business while the ongoing dispute is resolved by the AAT. Businesses eligible to apply for a review by the SBTD must meet the income tax definition of a ‘small business entity’, which broadly requires it to have had an aggregated turnover of less than $10m in the current or previous income year.

This measure is intended to assist small businesses with a genuine dispute to be able to continue trading until the AAT has determined that the debt in dispute is actually due. The SBTD will be required to assess that the dispute is genuine and does not impact on the integrity of the tax system before granting the pause or modification relief.

This extension to the AAT’s powers is intended to take effect after Royal Assent of the legislation, and gives welcome flexibility to the AAT’s powers to assist small businesses with a genuine dispute to have time for their case to be heard before any tax payment may become due.

Supporting small to medium enterprise participation in Commonwealth procurement

From 2021-22, the Government will provide $2.6 million over four years to support and strengthen Australian business participation in Commonwealth procurement processes.

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This funding will include:

  • Scanning of procurements to identify common ‘pain points’ for small and medium enterprises (SMEs)
  • Increasing communication of procurement opportunities to potential suppliers
  • Targeting Government Procurement Learning Events for SMEs to educate them on how to access supply chains (including with government buyers) and work in major project environments
  • Mandating the use of Dynamic Sourcing for Panels to make best use of panel arrangements
  • Piloting direct engagement of SMEs by the Department of Industry, Science, Energy and Resources for contracts up to $200,000.

This is part of a continuing process from the Federal Government to expand the opportunities available to SME to supply it with outsourced services.

Storm and flood incentives – tax treatment of qualifying grants

Income tax exemption will be provided to small businesses and primary producers who received qualifying grants following the storms and floods in Australia.   

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Qualifying grants exempt from income tax are Category D grants provided under the Disaster Recovery Funding Arrangements 2018, where the grants specifically relate to the storms and floods in Australia that occurred due to rainfall events between 19 February 2021 and 31 March 2021.

The small business recovery grants of up to $50,000 and primary producer recovery grants of up to $75,000 are grants eligible for income tax exemption under this measure.

These grants will be treated as non-assessable non-exempt income for tax purposes.

Alignment of Excise Refund Scheme for brewers and distillers with wine equalisation tax

From 1 July 2021, eligible brewers and distillers will be able to receive full remission of any excise they pay, up to a cap of $350,000 per financial year to align them with the wine equalisation tax producer rebate.

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The announced changes represent a welcome substantial increase from the current refund scheme where brewers and distillers are only able to receive up to 60% remission of any excise they pay, capped at $100,000.

This measure continues the theme of supporting brewers and distillers who have been negatively impacted by the COVID-19 pandemic and assisting the growth of the craft brewing and distilling industry.

Additionally, the excise refund scheme will reduce the inconsistencies in support arrangements received for alcohol producers by aligning the excise refund scheme with the producer rebate for wine producers.

This measure builds on the 2020-21 MYEFO measure Alcohol Taxation – automatic remission of excise duty for alcohol manufacturers.

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