Australia: Summary of certain business tax measures in federal budget

Extensions for temporary corporate tax measures, targeted concessions to further stimulate business investment

Extensions for temporary corporate tax measures

The federal budget includes extensions for a number of temporary corporate tax measures and introduces certain targeted concessions to further stimulate business investment.

Extension of company loss carryback and temporary full expensing

The ability for eligible companies to carry back tax losses and benefit from full expensing of eligible asset purchases by 12 months would follow on from announcements in the 2020-21 budget. 

  • The company loss carryback measures would be extended to 30 June 2023 and would enable corporate tax entities with an aggregated turnover of less than $5 billion* to carry back tax losses generated in the 2022-2023 income year to offset previously taxed profits in the 2018-19 or later income years.
  • Similarly, temporary full expensing would be extended for a further 12 months to 30 June 2023.
  • The cost of eligible depreciable assets acquired from 7:30pm (AEDT) on 6 October 2020 and first used or installed ready for use by 30 June 2023 could be deducted in full for businesses with turnover of up to $5 billion. 

*$=Australian dollar

Intangible assets effective life changes

Taxpayers would be able to self-assess the tax effective lives of eligible intangible depreciating assets acquired from 1 July 2023, including patents, registered designs, copyrights and in-house software. This treatment would align the tax treatment of intangibles with tangible assets and allow business to adopt a more appropriate useful life for their intangible assets.

Extension to the junior minerals exploration incentive

There would be an extension to the junior minerals exploration incentive (JMEI) for four years from 1 July 2021 through to 30 June 2025. The incentive had previously been scheduled to conclude on 30 June 2021.

The JMEI allows greenfield minerals explorers that have raised capital in an income year to forego a portion of their tax losses generated in that year in exchange for tax credits, which can be distributed to investors in the form of refundable tax offsets (for Australian resident individuals and super-funds) or additional franking credits (for Australian companies).

Minor amendments would allow unused exploration credits to be redistributed a year earlier than is available under the current law.

Updated list of exchange of information countries and further focus on tax treaties

The list of jurisdictions that have an effective information sharing agreement with Australia would be updated with an additional six countries to be added. Residents of listed jurisdictions would be eligible to access the reduced managed investment trust (MIT) withholding tax rate of 15% on certain distributions. 

The government also committed to also provide funding to facilitate on-going tax treaty negotiations.

KPMG observation

The government has focused on extending measures to provide corporate taxpayers with incentives to continue to invest in capacity-building expenditure and thus would continue to stimulate economic growth.

Read a May 2021 report prepared by the KPMG member firm in Australia

 

 

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