Another year has passed and that means it’s time for government to unveil its financial plans for the year ahead in the Budget. After a gruelling year of social distancing and lockdowns, many retailers will have been hoping for some relief so did they get their wish?
The two big headline measures for business were related to the temporary full expensing and the loss carry back for companies, both of which were introduced in the last Budget.
The government will extend the temporary full expensing measure until 30 June 2023. It was otherwise due to finish on 30 June 2022. Other than the extended date, all other elements of temporary full expensing will remain unchanged.
Currently, temporary full expensing allows eligible businesses to deduct the full cost of eligible depreciating assets. A business qualifies for temporary full expensing if it has an annual aggregated turnover under $5 billion.
Under the loss carry back measures, an eligible company (aggregated annual turnover of up to $5 billion) could carry back a tax loss for the 2019-20, 2020-21 or 2021-22 income years to offset tax paid in the 2018-19 or later income years.
The government will extend the eligible tax loss years to include the 2022-23 income year. Tax refunds resulting from loss carry back will be available to companies when they lodge their 2020-21, 2021-22 and now 2022-23 tax returns.
Temporary loss carry-back also complements the temporary full expensing measure by allowing more companies to take advantage of expensing, while it is available.
Of course, not every business wants to write off its fixed asset purchases up front. For many small, unincorporated businesses―including many retailers―there is simply nothing to celebrate here. For a start, the loss carry-back scheme relates only to companies―sole traders, trusts and partnerships don’t count. And for those businesses that want to retain some taxable profits―perhaps because the owners want to take advantage of the tax-free threshold―the inability to exit the temporary full expensing scheme is a missed opportunity. Big business can opt out (the legislation was amended last December specifically to allow this) but small business can’t. It was an obvious mistake―and the government didn’t do anything to fix it.
On the super front, the abolition of the $450 monthly earning threshold below which employers don’t have to make superannuation contributions will make a big difference to those on the lowest wages, including temps and casuals but it will come at the cost of businesses profits. Now that every employee, no matter what your income, is entitled to super, this should make a notable difference to the retirement saving of millions of low paid Australians, including women who make up a large proportion of that workforce.
The decision not to back away from the already legislated increase in employer super contributions from 9.5 per cent to 10 per cent on 1 July 2022 will also feed into bigger super balances at retirement and better standards of living for all retirees but in the short term the cost will be paid by business, who will have to pay for the increase.
By Mark Chapman from H&R Block
