Business tax measures
Expanding Patent Box Tax Regime
This Budget builds on last year’s announcement of a new Australian patent box regime, by:
- Expanding support from the current focus on medical and biotechnology industries to new innovations in the agricultural chemical and low emission technology areas. The expanded patent box regime will provide an incentive for companies to innovate with a concessional patent tax rate of 17% to apply to income derived from patents which have the potential to lower emissions, or patents linked to agricultural and veterinary chemical products listed on the Australian Pesticides and Veterinary Medicines Authority (APVMA), PubCRIS (Public Chemicals Registration Information System) register, or eligible Plant Breeder’s Rights (PBRs). This will apply to patents granted or issued after 29 March 2022, and for income years from 1 July 2023
- Expanding the 2021 Budget measure to allow patents granted or issued for medical and biotechnology innovations after 11 May 2021 to be eligible as well as allowing standard patents granted by IP Australia, utility patents issued by USPTO and European patents granted under EPC to be eligible. However, taxpayers will still only benefit from the concessional tax treatment to the extent that the R&D occurred in Australia. (In Bill introduced.)
While it is pleasing that the patent box regime has been extended to new industry areas, it is disappointing that it still applies to a narrow range of industries, as most global patent box regimes are industry agnostic. We also note that there is a misalignment of the eligible patent dates between different industry sectors. It is expected that there will be a consultation period around these proposed measures.
Temporary Reduction in Fuel Excise
In a targeted response to rapidly rising fuel prices, fuel excise rates will be reduced by 50% for the next six months. The Government expects that the reduction in excise will translate to a household saving of between $9.72 to $19.45 per tank of fuel depending on the size of the vehicle. Business consuming fuel in transport on public roads should also see some benefits with an expected reduction of 4.3 cents per litre for fuel used in heavy vehicles and up to $17.68 per tank of fuel for their light vehicle fleet. Despite the immediate reduction in excise rates it can be expected to take up to 2 weeks for those savings to reach petrol bowsers.
Small Business Measures
Technology Investment Boost
Businesses with aggregated turnover of less than $50m pa will be entitled to an additional 20% tax deduction for eligible expenses and assets acquired relating to digital uptake, such as portable payment devices, cyber security systems or subscriptions to cloud-based services. There is an annual spending cap of $100,000 which will cap the additional deduction at $20,000 pa.
The measures will apply from Budget night (claims for expenditure incurred by 30 June 2022 to be made in the following income year) until 30 June 2023.
Skills and Training Boost
Small businesses will also be entitled to the same 20% additional deduction for eligible expenditure on Australian registered external training courses for employees only. This measure will apply to eligible expenditure from Budget night (claims for expenditure incurred by 30 June 2022 to be made in the following income year) until 30 June 2024.
COVID-19 Business Grants
Payments from certain additional State and Territory COVID-19 business support and grant programs have been made non-assessable non-exempt (NANE) for income tax purposes until 30 June 2022, under the current measure.
Grant Funding for Industry – Commitment to Advancing the Australian Economy
The Government will provide $3.9 billion in funding to incentivise industry to invest in strategic areas of growth that are designed to shift Australia into a modern and globally competitive economy. The Government has made a commitment to increase regional growth, continue to modernise local manufacturing capability for global competitiveness, stimulate sovereign capability in the space sector and create a new resilient critical minerals industry.
- Regional Accelerator Program
$2.0 billion over 5 years will be provided to establish a Regional Accelerator Program (RAP) to drive transformative economic growth and productivity in regional areas to access programs to target local priorities in infrastructure, manufacturing and industry development, skills and training, research and development, and education
- Boosting Modern Manufacturing
$328.3 million over 5 years to further support the Modern Manufacturing Strategy, $250 million of which will be used to extend the Modern Manufacturing Initiative to support high-impact projects in the National Manufacturing Priority areas and $53.9 million to extend the Manufacturing Modernisation Fund
- Critical Minerals Strategy
Support for the critical minerals sector with an investment of $250.5 million over 5 years to help early-stage critical mineral projects reach market readiness. This includes $200 million for a Critical Minerals Accelerator Initiative and $50.5 million for the establishment of an industry-focused R&D centre
- Support for the Australian Space Industry
$1.3 billion from 2021-22 will be allocated to grow the Australian space sector and the space manufacturing industry, $1.2 billion of which will be used to establish a National Space Mission for Earth Observation
The Government announced several budget tax measures ahead of budget night.
Cash flow support and red tape reduction to help small business
- Package of measures to slash red tape and boost cashflow of small business entities (aggregated turnover less than $50m) and sole traders:
- New measures to automate tax reporting requirements and align instalment payment obligations with financial performance
- Allowing companies to calculate PAYG instalments based on financial performance, accessing automatic refunds if performance declines – expected by 1 Jan 2024
- Facilitating Single Touch Payroll data sharing with State & Territory Governments to cater pre-filling payroll tax returns – expected late 2023
- Allow option to report taxable payments reporting system data at same time as activity statements – expected by 1 Jan 2024
- Ensure all trusts have option to lodge income tax returns electronically – expected by 1 Jul 2024
- Allow alcohol and fuel sector SMEs to lodge and pay excise/excise equivalent customs duty on a quarterly basis – from 1 Jul 2023
The GDP uplift rate that applies to small to medium businesses, sole traders and others who use the instalment amount method for PAYG and GST instalments will also be reduced from 10% to 2% for the 2022-23 income year.
Farmers to access primary production concessions for carbon credit income
Proposed that primary producers will treat revenue from the sale of Australian Carbon Credit Units (ACCUs) and biodiversity certificates as primary production income, providing access to income tax averaging arrangements and the Farm Management Deposit Scheme. The Government will also change the taxing point of ACCUs and biodiversity certificates to the year they are sold. Application from 1 July 2022.