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Australia Budget 2022-23 Delivered Including Temporary Reduction in Fuel Excise, Patent Box Expansion, and Increased Deductions for Small Businesses — Orbitax Tax News & Alerts

Australian Treasurer Josh Frydenberg delivered the country's Budget 2022-23 on 29 March 2022. Some of the main tax-related measures of the Budget are summarized as follows:

Addressing Cost of Living Pressures – temporary reduction in fuel excise

The Government will help reduce the burden of higher fuel prices by reducing the excise and excise-equivalent customs duty rate that applies to petrol and diesel by 50% for 6 months beginning 30 March 2022 and ending 28 September 2022. The same will apply to all other fuel and petroleum-based products, except aviation fuel.

Cost of living tax offset

The Government will increase the low and middle income tax offset (LMITO) for the 2021-22 income year by AUD 420, which increases the maximum LMITO benefit in 2021-22 to AUD 1,500 for individuals and AUD 3,000 for couples.

Patent Box – expanding the patent box tax concession to agricultural sector innovations

The Government will expand the patent box, announced in the 2021-22 Budget and currently before Parliament, to support practical, technology focused innovations in the Australian agricultural sector. The Government will provide concessional tax treatment for corporate taxpayers who commercialise their eligible patents linked to agricultural and veterinary (agvet) 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). Eligible corporate income will be subject to an effective income tax rate of 17% for PBRs and patents granted or issued after 29 March 2022 and for income years starting on or after 1 July 2023. Eligible income will be taxed at the concessional tax rate to the extent that the research and development of the innovation took place in Australia.

Patent Box – expanding the patent box tax concession to low emissions technology innovations

The Government will expand the patent box to support the Government's technology focused approach to reducing emissions in line with the Government's target to achieve net zero emissions by 2050. The expanded patent box will provide concessional tax treatment for corporate taxpayers who commercialise their patented technologies which have the potential to lower emissions. Eligible corporate income will be subject to an effective income tax rate of 17%, for patents granted after 29 March 2022 and for income years starting on or after 1 July 2023. Eligible income will be taxed at the concessional tax rate to the extent that the research and development of the innovation took place in Australia.

Patent Box – tax concession for Australian medical and biotechnology innovations: updated policy specifications

The Government has expanded the 2021-22 Budget measure Patent Box – tax concession for Australian medical and biotechnology innovations. The Government will allow patents granted or issued after 11 May 2021 to be eligible for the regime. This will incentivise further research and development (R&D) to be undertaken in Australia on medical and biotechnology patents, much of which occurs after the patent application. The Government will also allow standard patents granted by IP Australia, utility patents issued by the United States Patent and Trademark Office (USPTO), and European patents granted under the European Patent Convention (EPC) to be eligible. This will remove regulatory barriers to accessing the patent box regime for Australian developed innovations patented in the major overseas jurisdictions with equivalent patent regimes. However, taxpayers will still only benefit from the concessional tax treatment under the patent box to the extent that the R&D occurred in Australia.

Small Business – skills and training boost

The Government is introducing a skills and training boost to support small businesses to train and upskill their employees. The boost will apply to eligible expenditure incurred from 7:30pm (AEDT) on 29 March 2022 (Budget night) until 30 June 2024. Small businesses (with aggregated annual turnover of less than AUD 50 million) will be able to deduct an additional 20% of expenditure incurred on external training courses provided to their employees. The external training courses will need to be provided to employees in Australia or online, and delivered by entities registered in Australia. Some exclusions will apply, such as for in house or on the job training and expenditure on external training courses for persons other than employees.

The boost for eligible expenditure incurred by 30 June 2022 will be claimed in tax returns for the following income year. The boost for eligible expenditure incurred between 1 July 2022 and 30 June 2024, will be included in the income year in which the expenditure is incurred.

Small Business – technology investment boost

The Government is introducing a technology investment boost to support digital adoption by small businesses. The boost will apply to eligible expenditure incurred from 7:30pm (AEDT) on 29 March 2022 (Budget night) until 30 June 2023. Small businesses (with aggregated annual turnover of less than AUD 50 million) will be able to deduct an additional 20% of the cost incurred on business expenses and depreciating assets that support their digital adoption, such as portable payment devices, cyber security systems or subscriptions to cloud based services. An annual cap will apply in each qualifying income year so that expenditure up to AUD 100,000 will be eligible for the boost.

The boost for eligible expenditure incurred by 30 June 2022 will be claimed in tax returns for the following income year. The boost for eligible expenditure incurred between 1 July 2022 and 30 June 2023 will be included in the income year in which the expenditure is incurred.

For more information, click the following links for the Budget Speech 2022-23 and the Budget webpage.