Vital tax measures from the federal price range 2021-2022 | Dentons

Australian federal treasurer Josh Frydenberg has approved an economic recovery budget as Australia emerges from a pandemic and brief recession.

In addition to a series of reforms to pensions, personal tax and the first home saver, budget measures include a range of corporate and corporate tax measures. Many of these corporate and corporate tax measures have already been announced or merely augment existing temporary measures. However, there are some important new initiatives to increase business spending and investment in Australia.

Here is a brief summary of the key tax measures that can affect your business.

Revised start date for the CCIV regime (Corporate Collective Investment Vehicle)

The government will reset the start date for the CCIV regime, which will now begin on July 1, 2022. This measure was first announced in the 2016-17 budget and proposes the introduction of a new tax and regulatory framework for corporate collective investment vehicles.

CCIVs are business investment instruments that enable tax flow. The move aims to strengthen the international competitiveness of the Australian managed fund industry by enabling fund managers to offer investment products using vehicles that are better known to overseas investors.

The tax framework for CCIVs is largely aligned with the attribution tax regime for Managed Investment Trusts (MITs). CCIVs must meet similar eligibility criteria as MITs. This includes being widespread and dealing primarily with passive investment activities. CCIVs are not intended as commercial vehicles. Investors in CCIVs are typically taxed as if they had invested directly in the underlying assets.

Patent Box: Tax break for Australian innovations in medicine and biotechnology

The government has announced that it will introduce a patent box tax system that will tax companies’ income from patents at a preferential rate of 17%. If approved, the license will be valid from July 1, 2022.

The patent box applies to income from Australian patents for medicine and biotechnology. Currently, profits from such patents are taxed at the corporate tax rate (ie 30% for large companies or the lower rate for small to medium-sized companies).

Patent Box: Clean Energy Sector

In addition to the new patent box tax system for medical and biotechnological patents, the government is under discussion as to whether a patent box tax system should also support the Australian clean energy sector.

Upfront tax deductions for allowable depreciable assets

The government will extend a temporary measure for an additional 12 months (through June 30, 2023) to allow companies with total annual sales or income less than AU $ 5 billion to deduct the full cost of the eligible depreciable assets regardless of the value of the asset .

Self-assessment of the useful life of intangible assets to be depreciated

Taxpayers can self-assess the effective life of eligible intangible assets such as patents, registered designs, copyrights and internal software. The useful life of such assets is currently determined by law.

This measure is scheduled to begin on July 1, 2023 after the end of the temporary early withdrawal.

Temporary loss carry-back extension

The government will extend the temporary measure so that eligible companies can recycle (use) tax losses from income year 2022-23 to offset previously taxed profits in income year 2018-19.

Companies with total sales of less than AU $ 5 billion are eligible for the extended loss carryforward. The tax refund is limited by the fact that it is required that the amount returned is not higher than the previously taxed profit and that the return transport does not create a franking account deficit.

Employee participation programs: Deletion of the termination of the employment relationship as a tax point

The government has announced that it will remove the cessation of employment as a tax point for tax-deferred employee participation programs (ESS).

If the criteria for employees to defer their tax liability under an ESS are currently met, the deferred tax point is the earliest of:

  • Termination of Employment
  • In the case of shares for which there is no risk of expiry and no sales restrictions
  • In the case of options, if the employee exercises the option, there is no risk of the resulting portion forfeiting and no sales restriction
  • The maximum deferral period of 15 years

All deferred tax points are retained except for the employment tax point setting.

This measure is intended to be applied prospectively to ESS interests issued from the first income year after the changes came into effect.

Abolition of preferential tax treatment for offshore bank units (OBUs)

The government has announced that it will end the reduced effective tax rate of 10% under the Australian OBU regime.

The OECD has previously raised concerns about the Australian OBU regime. This measure is intended to address the concerns of the OECD.

Existing OBUs can be converted until the end of their income year 2022-23. Newcomers will be refused the reduced tax rate from October 26, 2018.

The government will also remove the current withholding tax exemption for interest and gold fees paid by OBUs on eligible offshore loans. This will not begin until January 1, 2024.

Update of the list of countries for information exchange

The government will update the list of jurisdictions under an effective information exchange agreement with Australia effective January 1, 2022. Residents of publicly traded jurisdictions are eligible for the Managed Investment Trust (MIT) reduced withholding tax rate of 15% on certain distributions. rather than the 30% failure rate.

The new jurisdictions are: Armenia, Cabo Verde, Kenya, Mongolia, Montenegro and Oman.

Tax residence rules for individuals

The tax residency rules for individuals will be replaced. Under the new rules, the main test will be a simple “Bright Line” test – a person who is physically present in Australia for at least 183 days in an income year will be taxable in Australia. Individuals who fail the primary test are subject to secondary tests based on a combination of physical presence and measurable, objective criteria. These domestic tax residence rules are subject to Australian double taxation treaties.

New disclosure requirements for non-profit organizations (non-profit, NFP)

Tax law currently allows non-profit NFPs to assess their eligibility for income tax exemptions without being required to report to the ATO. Beginning July 1, 2023, the ATO will require income tax-exempt NFPs with an Active Australian Business Number (ABN) to submit information that will enable them to self-assess their eligibility for the exemption.