Tax Special Update

DLA Partners Luxury Property Services in Natai since 2005 Tax Special Update

Over recent weeks, the Government has introduced some new measures and released for comment exposure draft legislation on other measures announced by the previous Government in its Budget from March this year. Treasury has also released exposure draft legislation for consultation on some important tax issues.

 

Previous Budget Measures – Exposure Draft Legislation

 

Small Business Skills and Training Boost (Skills Boost)

This measure introduces the 20% bonus deduction for external training costs incurred by a business for training and upskilling staff.  The proposed bonus deduction is for eligible expenditure incurred by small businesses (aggregated turnover less than $50M):

  • incurred between 29 March 2022 and 30 June 2024 (expenditure incurred prior to 30 June 2022 will be claimed in the 2023 income tax return);
  • incurred on external training delivered by providers registered in Australia with at least one of the four Government authorities (ASQA, TEQSA, Victorian Registration and Qualifications Authority or Training Accreditation Council of WA);
  • be deductible under a provision of the income tax law in the year it is incurred; and
  • be only for the training of employees.

We should expect that arguments will be put forward during the consultation phase to include sole traders, individuals in a partnership and independent contractors.

 

 

Small Business Technology Boost (Technology Boost)

To assist small businesses (aggregated turnover less than $50M) to become digital, they will be entitled to a 20% deduction on eligible expenditure (up to $100,000 per year) to support their digital transformation.

The bonus deduction is capped at $20,000 per qualifying income year for eligible expenditure incurred between 29 March 2022 and 30 June 2023 (with expenditure incurred prior to 30 June 2022 claimed in the 2023 income tax return). The maximum bonus deduction is $40,000.

Currently, the draft explanatory material states that eligible expenditure is for business expenses and depreciating assets (first used or installed ready for use before 1 July 2023) that support digitalisation, which includes but is not limited to:

  • digital enabling items – computer and telecommunications hardware and equipment, software, systems and services that form and facilitate the use of computer networks;
  • digital media and marketing – audio and visual content that can be created, accessed, stored or viewed on digital devices; and
  • e-commerce – supporting digitally ordered or platform enabled online transactions.

Further, ineligible expenditure includes:

  • salary or wages;
  • capital works;
  • financing costs;
  • training or education costs; and
  • costs included or forming part of the cost of trading stock

We would expect, given the broad nature of the expenditure that is proposed to be eligible for the technology boost, more detailed guidance will be required from Treasury and/or the ATO to assist businesses in understanding what is eligible expenditure in making the correct claim.

 

New Legislation – FBT Exemption for Electric Vehicles

 

Overview

New legislation, first introduced on 27 July 2022, amends the FBT law to exempt from FBT the use, or availability of use of cars that are zero or low emissions vehicles made by employers to current employees.  To be eligible for the exemption:

  • the value of the car at the first retail sale must be below the luxury car tax threshold for fuel efficient cars ($84,916 for the 2022-23 year);
  • apply only to vehicles that are “cars” for FBT purposes; and
  • the car is first held and used on or after 1 July 2022.

The explanatory material indicates that a vehicle acquired before 1 July 2022 and delivered after this date may still be eligible for the exemption.

Electric Cars

To be eligible for the exemption, the car must be an electric car that must:

  • use one or more electric motors for propulsion; and
  • be fuelled by an off-vehicle power source, a battery, an electric generator, a hydrogen fuel cell, or a combination of these.

Zero or Low Emission Vehicles

These vehicles are defined for FBT purposes and includes:

  • a battery vehicle;
  • a hydrogen fuel cell electric vehicle; and
  • a plug-in hybrid electric vehicle.

Existing FBT Treatment

The current FBT treatment for cars that do not meet the requirements to be a zero or low emission vehicle, and for electric vehicles that are not cars (e.g. motorbikes), remains the same.

 

New Legislation – Tax Treatment of New or Revised Visa Programs

The Government has introduced new legislation to reduce the tax rate on certain income (such as salary and wages) earned by foreign resident workers participating in the  Pacific Australia Labour Mobility Scheme from marginal rates starting at 32.5% to final withholding tax of 15% (with effect for the 2022-23 income year).

These amounts are not assessable income of those workers under any other income tax law provisions.

Importantly, those workers who have been under the program longer term and who are tax residents of Australia are not subject to this regime and pay tax at resident individual rates on their taxable income.

 

Other Consultations/Exposure Draft Legislation

 There a range of consultations and Exposure Draft Legislation that have been released for comment including:

 

Crypto Assets

 Treasury has released a Consultation Paper to clarify that digital currency (such as Bitcoin) are not taxed in Australia as “foreign currency”.  This is in response to the Government of El Salvador treating Bitcoin as a national currency in late 2021.

 

Digital Assets and Transactions

The Board of taxation has released for comment a consultation guide that considers the current taxation treatment of digital assets in Australia given the changing environment in which they exist.

 

FBT Record Keeping

The Government has released Exposure Draft Legislation to amend the FBT law to reduce the compliance burden on employers by allowing the Commissioner of Taxation to rely on, in appropriate circumstances, alternative records rather than the current statutory evidentiary documents for specified fringe benefits, such as prescribed employee declarations.

The alternative documents and records will be determined by the Commissioner by way of legislative instrument with a commencement date to be subject to passage of the legislation through the parliament.