On 11 May 2021, Australian Treasurer Josh Frydenberg delivered the country's Budget 2021-22. The main tax-related measures of the Budget are summarized as follows:
- An additional AUD 7.8 billion in personal income tax cuts will be provided by retaining the low and middle income tax offset (LMITO) in 2021-22;
- Temporary tax incentives introduced by the 2020-21 Budget will be extended by one year, including:
- temporary full expensing, which will be made available until 30 June 2023 for eligible businesses with aggregated annual turnover or total income of up to AUD 5 billion; and
- temporary loss carry-back, which will allow eligible companies with aggregated annual turnover of up to AUD 5 billion to carry-back tax losses incurred in the 2022-23 income year to offset previously taxed profits as far back as the 2018-19 income year (in addition to losses incurred in 2019-20, 2020-21, and 2021-22);
- A patent box regime will be introduced from 1 July 2022, providing that income derived from Australian medical and biotech patents will be taxed at an effective concessional corporate tax rate of 17%, which will be limited to income from patents applied for after the Budget announcement;
- The cessation of employment taxing point for tax-deferred Employee Share Schemes (ESS) will be removed for all companies, resulting in tax being deferred until the earliest of the remaining taxing points:
- in the case of shares, when there is no risk of forfeiture and no restrictions on disposal;
- in the case of options, when the employee exercises the option and there is no risk of forfeiting the resulting share and no restrictions on disposal; or
- the maximum period of deferral of 15 years;
- The rights for small business to pause the collection of disputed debts will be enhanced, including that for cases under review by the Administrative Appeal Tribunal (AAT), small business entities with an aggregated turnover of less than AUD 10 million per year will be allowed to apply to the Small Business Taxation Division of the AAT to have ATO debt recovery actions paused until their underlying case is decided by the AAT;
- A Digital Games Tax Offset (DGTO) will be introduced from 1 July 2022, which will provide eligible game developers with a 30% refundable tax offset for qualifying Australian games expenditure, subject to the conditions that the game must not have gambling elements and that a minimum of AUD 500,000 in qualifying expenditure has been spent on the game;
- The excise tax relief for brewers and distillers will be increased from 1 July 2021, including a full remission (up from 60%) of any excise paid on the alcohol produced up to a cap of AUD 350,000 per year (up from AUD 100,000);
- Taxpayers will be allowed to self-assess the effective life of certain depreciating intangible assets for tax purposes, rather than being required to use the prescribed effective life, which will apply to patents, registered designs, copyrights, in-house software, licenses, and telecommunications site access rights acquired after the completion of the temporary full expensing incentive above (30 June 2023), with taxpayers allowed to bring deductions forward if they self-assess the assets as having a shorter effective life than the current statutory life.
In addition to the above, the Budget also includes the reduction in the tax rate for small and medium companies to 25% from 1 July 2021, which was already approved and scheduled.
Note, where an effective date is not specified above, the effective date of the Budget measure will depend on the date the relevant legislation receives Royal Assent (is enacted).