Australian Tax Update – June 2021

Individual Taxpayers:

  • Super Guarantee rate rising 1 July 2021 – The superannuation guarantee rate will increase from 9.5 per cent to 10 per cent on 1 July 2021.
  • Low-income tax offset increased. – The low-income tax offset (LITO) increased to $700 from 1 July 2020. (From $445).
  • Extending the low- and middle-income tax offset (LMITO) – low- and middle-income tax offset will continue to be available for the 2021–22 income year.
  • Tax incentives for investment in affordable housing – Australian resident individuals who provide affordable rental housing to people earning low to moderate income can claim an additional affordable housing capital gains discount of up to 10%. To qualify for this additional discount, they must have provided qualifying affordable rental housing through a registered community housing provider.

Business Taxpayers:

    • Car depreciation limit increased for 2021-22 – the car cost limit for depreciation for the 2021-22 financial year has been increased to $60,733 (previously $59,136). The car limit is indexed annually in line with movements in the CPI motor vehicle purchase sub-group.
    • The corporate tax rate reduced to 26% – for base rate entities for 2020–21, the corporate tax rate has been reduced to 26% from 27.5%.
    • Enhanced instant asset write-off – The instant asset write-off threshold for each asset increased to $150,000 and eligibility extends to businesses with an aggregated turnover of less than $500 million. The time by which the asset must be first used, or installed ready for use, to qualify for the enhanced instant asset write-off has been extended until 30 June 2021. This is provided the asset was purchased by 31 December 2020.
    • Temporary full expensing of depreciating assets – The government announced a temporary full expensing incentive to support businesses and encourage new investment. Businesses with an aggregated turnover of less than $5 billion can immediately deduct the business portion of the cost of eligible new depreciating assets. The eligible new assets must be first held, and first used or installed ready for use for a taxable purpose, between 7:30pm AEDT on 6 October 2020 and 30 June 2021. This date is extended to 30 June 2022 pending royal assent.
    • Loss carry back tax offset – Eligible companies with a taxable loss may be able to claim the offset. In particular, eligible companies that find themselves in a taxable loss position due to the instant asset write off or temporary full expensing rules could use the loss carry back tax offset instead of carrying forward the losses to future years. The offset effectively represents the tax an eligible company would save if it was able to deduct the loss in the earlier year using the loss year tax rate. As it is a refundable tax offset, it may result in a cash refund, a reduced tax liability or a reduction of a debt owing to the ATO. The eligible company does not need to amend the earlier income years to claim the offset.
    • CGT concessions -In addition to the more widely available CGT concessions, small businesses can access the following specific concessions:
      • 15 year-exemption
      • 50 % active asset reduction
      • retirement exemption
      • rollover
      • restructure rollover.

You can apply as many concessions as you’re entitled to until the capital gain is reduced to nil. There are rules about the order in which you apply the concessions, any current year or prior year capital losses, and the CGT discount.

The rules are complex and getting it wrong can be costly, so ATO recommends seeking advice before restructuring or disposing of assets and ensure your business structure is designed to take advantage of the available concessions.

  • PAYG instalment indexation suspended – The government suspended the indexation of PAYG and GST instalment amounts for small businesses in 2020–21 and the ATO allowed taxpayers to vary their quarterly instalments without penalty. Some businesses that reduced their instalment amounts during the year may receive a larger than expected tax bill. The ATO offers a range of payment plans to assist.

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