SMEs are front and centre in the 2021/2022 Federal Budget.
The company tax rate for small business will be 25% from 1 July 2021
The instant asset write-off has been extended for another year to 30 June
The 2021/22 Federal Budget has again reemphasised that small and family businesses are the engine room of our economy. To this end, the Commonwealth Government has announced it will deliver more than $16 billion in tax cuts to small and medium businesses by 2023-24, with around $1.5 billion flowing in 2019‑20.
These cuts include reducing the tax rate for small and medium companies from 30% in 2014‑15 to 25% from 1 July 2021.
Extending tax incentives for businesses that invest
The government is supporting business investment by extending temporary full expensing and temporary loss carry-back for an additional year.
The critical budget measure for most SMEs is a one-year extension to the government’s temporary “full expensing” scheme. It is also known more broadly as the “instant asset write-off”, which allows businesses with a turnover or income of less than $5 billion to immediately write off the cost of assets they first use or install by 30 June 2023.
“SMEs experiencing COVID‑19 related supply disruptions, or who have longer to term investment plans will now have more breathing space to take advantage of the instant asset write-off,” said Oliver Wade, Head of Marketing & Partnerships, OnDeck Australia.
Temporary loss carry-back
The government has also extended the temporary loss carry-back by one year. This support means that eligible businesses with an annual turnover of up to $5 billion (which covers most SMEs) can carry back tax losses from the 2022-23 income year to offset previously taxed profits as far back as the 2018-19 income year.
The tax refund will be available to companies when they lodge their 2020-21, 2021-22 and now 2022-23 tax returns. Wade said, “This extension will help increase cash flow and especially those small businesses that were profitable before the COVID-19 pandemic but are now behind the financial eight ball.”
The temporary full expensing and temporary loss carry-back measures are estimated to boost GDP by around $2.5 billion in 2020‑21, $7.5 billion in 2021‑22, and $8 billion in 2022‑23, and create around 60,000 jobs by the end of 2022‑23[i].
[i] https://budget.gov.au/2021-22/content/factsheets/download/factsheet_tax.pdf</span”>”
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