In 2022-23, Federal Budget introduced The Skills and Training and Technology Boosts and has made an appearance again in revelation draft form. In today’s blog, we’ll explain who can have access to measures and what expenses they support.
Revival of the 120% Technology and Training Boost Measures
In the 2022-23 Federal Budget, the former legislative authority declared that it would announce a Skill and Training Boost and a Technology Investment Boost for entitled expenses by businesses with a total turnover below $50m. These measures have reappeared as exposure drafts.
Covid-19 Grants and their Tax Status
Checking out which Covid-19 grants are tax-free is quite hard. For instance, when the legislative authority extended grants into new instalments or tranches, the legislation didn’t keep speed hence, they have some grants for the same goal, being tax-free and others taxable. A new government instrument has been issued that shows some additional State Government Covid-19 grants that are eligible as non-assessable non-exempt (NANE) income in the recipient’s hands.
Can Tax-Free Covid-19 Grants be Divided Tax-Free to Investors/Shareholders?
There is a popular issue and view that cash flow boosts tax-free government grants related to Covid-19 that are treated as non-assessable, non-exempt income in the company’s hands – can be divided to stockholders as tax-free. The recent private ruling released on the ATO legal database ends up that the cash flow boost amount obtained by the company must be processed as income under ordinary concepts. It means sources that are distributed from this amount would be taxed as dividends in shareholders’ hands, although the amount has been divided by a liquidator in relation to the winding up of the company, and the cash flow amount was treated as tax-free in the company’s hands.
Elimination of the $250 Self-Education Expenditure Threshold
Legislation before Parliament eliminates the $250 self-education expenses threshold.
Upcoming Changes for Business
There are various changes for business taxpayers marked. These include:
- Removal from the two-year amendment time
Treasury has issued draft regulations that would remove certain taxpayers that have complex tax affairs or international tax dealings from having access to the two-year amendment period for medium and small business entities. These taxpayers would be liable to the standard four-year amendment time instead. The change is likely to be applied to income tax returns for the income year 2022 and later years. The draft regulations imply that a taxpayer won’t be eligible for a two-year amendment time period if they:
- Have transactions between parties that refer to assets or non-cash advantages with around $50,000 market value.
- Obtain approximately $200,000 assessable income from a foreign source. To inhibit structuring arrangements being initiated to avoid the four-year time period, the $200,000 threshold would be evaluated as a combined threshold, including the assessable income from the required entity.
- Are either non-resident entities or foreign-controlled Australian entities.
- Participate in schemes taken by either Multinational Anti-Avoidance Law (MAAL) or the Diverted Profits Tax (DPT).
- Have a minimum of 10 other connected affiliates or entities.
- May be eligible for the R&D tax offset or certain deductions, adjustments, and recoupments.
- Have used CGT rollover relief in Division 615 under the interposed holding company rules, the Subdivision 126-B rollover rules or the demerger rollover provisions.
- Are liable to Division 855.
- Thin Cap Changes
Treasury has published a consultation paper with new amendments to the thin capitalisation rules, a new rule restricting deductibility of payments related to intangibles and changes in connection with tax transparency. The new amendments change the ‘safe harbour debt amount’ in connection with an OECD proposal that directly restricts net interest deductions to 30% of EBITDA. This would substitute the current asset-based safe harbour test (net assets’ 60%).
When it is the matter of proposed new rule that could affect deductions claimed for payments in relation to intangibles and royalties the legislative authority is trying to identify the concerns that multinational groups can switch profits to low or no tax jurisdictions to prevent paying tax in Australia. The growth of the digital economy is likely to have increased the issue in this area.
The legislative authority is also focusing on tax transparency’s enhancement by multinational groups by needing the public reporting of tax details on a country-by-country basis, required reporting of material tax risks to stockholders and needing firms presenting for Australian Government contracts worth over $200,000 (including GST) to state their nation of domicile for tax purposes.