Date posted: 30/03/2022

Federal Budget 2022-23: 'Steady as you go’ for business in the 2022 budget

There are minimal tax changes for business in this budget

In brief

  • To help with cash flow some changes will be made to the pay- as- you- go instalment system
  • An extension to the patent box regime will encourage innovation
  • A 120% skill and training deduction is available for small businesses

COVID, bushfires and now floods. The resilience of the Australian business community has been constantly challenged over the past two years, and predictions by Australia’s Chief Health Officer are that waves of COVID infection will continually cause disruption.

Not much has changed for business in this budget. Key measures to stimulate business investment have not been extended and reforms to the small business Capital Gains Tax (CGT) rollover provisions which would allow easier restructuring and exit are still in no man’s land. 

The small business focus in this Budget is firmly on helping businesses to digitalise (which is discussed in a related article) and improving the skills of their workforce via a 120% deduction for spending on training. There are also some changes to assist small business with cash flow though the pay-as-you-go (PAYG) instalment system.

Other business initiatives include the expansion of the patent box regime and improving the attractiveness of employee share schemes.

PAYG instalments

To assist with cash flow, several changes have been made to how PAYG instalments are calculated.

Statutory formula uplift temporarily reduced

The GDP uplift factor that applies when the statutory formula for calculating pay-as-you-go instalments is used is being reduced to 2% from 10% for the 2022-23 year. It is expected to deliver $1.85 billion in cash flow support for 2.3 million small to medium businesses, sole traders and individuals with passive income (including some self-funded retirees). This is a temporary change – it operates only for the 2022-23 year for instalments falling due after the enabling legislation receives Royal Assent. 

Allowing PAYG instalments to vary with financial performance in 2024

The government has announced that by 1 January 2024 there will be systems in place to allow companies to calculate PAYG instalments based on current financial performance and potentially obtain an automatic refund of previous overpaid PAYG instalments. 

It will not apply to all companies. The Government has stated that this method will initially support over 500,000 companies. Details  are sketchy and it is not known how eligible companies will be identified. 

Skills and training boost

Small business (turnover of less than $50 million) will be able to claim an additional 20% deduction for expenditure incurred on external training courses provided to their employees in Australia or by Australian registered entities between 29 March 2022 and 30 June 2024. 

Claims for expenditure incurred before 30 June 2022 will be included in tax returns for the year ended 30 June 2023. Expenditure incurred after 30 June 2022 will be included in the tax return for the financial year in which the expenditure is incurred. 

Patent box

The government has expanded the patent box concessions from medical and biotechnology industry to also include low emission technology innovations and agricultural sector innovations that have a patent issued after 29 March 2022. The patent box legislation for the medical and biotechnology industry, which was an announcement from the last Budget is currently before Parliament. 

The Budget says the commencement date for medical and biotechnology patents is now 11 May 2021 rather than 1 July 2022.

Significant supply chain disruptions mean that many businesses, particularly those dealing with natural disasters, need these incentives extended a further year. But no extension was announced in this budget.

Employee share schemes

A variety of changes have been made to employee share schemes to make them more attractive. These changes apply to larger offers in unlisted companies. 

Full expensing and loss carry back – no changes

The government wants a business led recovery. Strong government support measures such as JobKeeper and Cash Boost have been withdrawn. Full expensing and loss carry back which were introduced and extended to support business investment in previous Budgets are due to expire after 30 June 2023. Whilst that is just over a year away, significant supply chain disruptions mean that many businesses, particularly those dealing with natural disasters, need these incentives extended a further year. But no extension was announced in this budget.

Simplification of small business CGT concessions still needed

Simplification of the small business capital gains tax provisions to assist small business owners to restructure and/or exit their business has been needed for a long time. As many businesses looking to reset and adapt to constant business disruptions these changes were needed more than ever. CA ANZ has been a strong advocate for the adoption of the Board of Taxation’s (BoT) recommendations on such changes and it is disappointing that more than 2 years after publication of the Board report the government has still not responded. 

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