May’s 2021-22 saw both the announcements of the Federal Budget and Victorian State Budgets, both of which had potential implications for Matthews Steer business clients.
TAX TAKEAWAYS FOR VICTORIAN BUSINESS OWNERS – FEDERAL BUDGET 2021
The Federal Budget saw the government outline a number of tax measures directed at innovation and incentivising businesses. Extensions of existing write-off schemes, and specific support for specific industries including small brewers, video gaming and medical and biotech start-ups, all designed to kickstart the post-COVID-19 Australian economy.
At a state level, Treasurer Tim Pallas announced payroll tax relief for small and medium Victorian businesses, but a payroll tax surcharge levy for big business. Elsewhere the budget saw increases stamp duty and land tax, the Victorian treasurer Mr Pallas said the government was asking businesses “to help out their community”.
So, how do the latest tax measures impact Australian and Victorian businesses? We take a look at the significant takeaways from Federal Budget ’21 and the 2021 Victorian State Budget, below.
What: Full Expensing of Depreciating Assets (FEDA) has been extended for another 12 months until June 30, 2023
Who it impacts: Businesses with a turnover of up to $5-billion.
Takeaways:
- Under the extension to FEDA (AKA the instant asset write-off) business owners can immediately write off the full value of eligible depreciating assets’ capital purchases, for example: “a tradie can buy a new ute, a farmer a new harvester and a manufacturer expand their production line,” (Treasurer Josh Frydenberg). FEDA applies to capital purchases must between the last Federal Budget on October 6, 2020 and June 30, 2023. A deduction can only be claimed in the first year that the asset is used or installed for use, and it can’t be claimed for capital works.
- For businesses with an aggregated turnover of less than $50 million, temporary full expensing also applies to the business portion of eligible second-hand depreciating assets.
NB: Where businesses are looking at purchasing capital assets, there might be other federal and state government funding available. Speak to our team about your eligibility for government grants and financial assistance programs.
What: The temporary loss carry back scheme has been extended for another 12 months until June 30, 2023
Who it impacts: Businesses with a turnover of up to $5-billion.
Takeaway:
- Business owners can offset any losses made in the 2020, ’21, ’22 and ’23 financial years against profits made between the 2019 financial year and 2022 financial year. The value of the rebate is limited – it can’t be more than the earlier taxed profits – and Companies that opt not to leverage the loss carry back scheme can continue to carry losses forward.
What: Increase in superannuation guarantee rate to 10% from July 1, 2021
Who it impacts: Businesses making employee superannuation contributions.
Takeaway:
- The increase in super guarantee will mean higher costs for some employers.
If you want to learn more about how Federal Budget 2021 impacts your business, speak to Matthews Steer’s accounting or business advisory teams on (03) 9325 6300.
TAX TAKEAWAYS FOR VICTORIAN BUSINESS OWNERS – STATE BUDGET 2021
What: Changes to payroll tax thresholds, rates and levies
Who it impacts:
- Tax-free threshold: approximately 42,000 small and medium businesses across Victoria.
- Reduced rage of payroll tax: approximately 4,000 regional businesses.
- Big business levy: 9,100 (approximately 5% of) Victorian businesses.
Takeaways:
- Business owners will see an increase in the payroll tax‑free threshold to $700,000 (from $650,000) from July 1, 2021.
- Business owners in regional Victoria will pay a reduced 1.21% rate of payroll tax from July 1, 2021, down from 2.02%.
- Victorian businesses that pay more than $10 million in national wages will pay a levy for Victorian employees via a 0.5% payroll tax surcharge from January 1, 2022.
What: Increase in stamp duty on high-value property
Who it impacts: Home buyers of properties worth $2-million or more.
Takeaways:
- From July 1, 2021, Victorians purchasing properties valued at more than $2-million will pay an extra 1% stamp duty (now 6.5%) to $110k where the dutiable value of a property they are purchasing is more than $2-million.
What: Windfall gains tax
Who it impacts: Owners of large holdings who receive an influx of income of more than $50,000 from rezoning.
Takeaways:
- For owners of properties valued at less than $1.8-million, the land tax rate will increase by 0.25%, and by 0.3% for properties valued between $1.8-million and $3-million in the 2022 land tax year.
- The 2022 land tax year will also see an increase in the general land tax threshold to $300k (from $250K).
- Land tax threshold for trusts will remain at $250k.
If you want to learn more about how Victorian Budget 2021 impacts your business, call Matthews Steer’s accounting/business advisory team on (03) 9325 6300.