Australian Taxation Changes: Adapting to the New Economic Reality

Australia's 2021 tax policy changes aim to stimulate economic recovery by supporting business competitiveness and compliance after 2020 challenges.

As Australia emerges from the challenges of 2020, several tax policy changes have been implemented in 2021 to stimulate economic recovery. Understanding these changes is crucial for businesses aiming to remain competitive and compliant.

1. Corporate Tax Rate Adjustments

The corporate tax landscape in Australia has seen notable adjustments:

Small and Medium Enterprises (SMEs): Companies with an aggregated turnover below AUD 50 million are now subject to a reduced tax rate of 25%, down from the previous 27.5%. This change aims to support smaller businesses in their recovery efforts.
Large Corporations: Entities exceeding the AUD 50 million turnover threshold continue to be taxed at the standard 30% rate.

2. Temporary Full Expensing Extension

To encourage business investment, the government has extended the temporary full expensing measure:

Eligibility: Businesses with an aggregated turnover of up to AUD 5 billion can immediately deduct the full cost of eligible depreciable assets acquired and first used or installed by 30 June 2023.
Benefits: This incentive supports cash flow and investment in business growth by allowing immediate deductions.

3. Loss Carry-Back Provision

Aimed at providing tax relief, the loss carry-back measure has been introduced:

Mechanism: Eligible companies can offset tax losses against profits from previous years, generating a refundable tax offset.
Time Frame: This applies to losses incurred in the 2019–20, 2020–21, and 2021–22 income years, which can be carried back against profits as far back as the 2018–19 income year.

4. Superannuation Guarantee Increase

Changes to superannuation affect employer obligations:

Rate Increase: The Superannuation Guarantee rate has risen from 9.5% to 10% as of 1 July 2021. Employers must ensure payroll systems are updated to reflect this change and maintain compliance.

5. Instant Asset Write-Off Threshold

The Instant Asset Write-Off scheme continues to support business investments:

Threshold: Eligible businesses can immediately deduct purchases of eligible assets costing less than AUD 150,000, provided the asset was purchased by 31 December 2020 and first used or installed by 30 June 2021.
Application: This measure assists businesses in managing cash flow and investing in necessary equipment.

Navigating the Changes

To effectively adapt to these tax changes, businesses should:

Consult Professionals: Engage with tax advisors to understand the specific implications of each change on your business operations.
Update Systems: Ensure accounting and payroll systems are revised to accommodate new rates and thresholds.
Plan Investments: Consider the benefits of asset purchases and other investments in light of available deductions and incentives.

Staying informed and proactive will enable businesses to leverage these tax changes for sustained growth and compliance in the evolving economic landscape.

If you would like to review your strategies for 2021, book a complimentary consultation with DGMS Group.

PwC Australia. (2021). Taxes on corporate income – Australia. Retrieved from https://taxsummaries.pwc.com/australia/corporate/taxes-on-corporate-income
EY Global Tax News. (2021). Australia issues 2021-22 federal budget. Retrieved from https://globaltaxnews.ey.com/news/2021-5544-australia-issues-2021-22-federal-budget
AGI Bookkeeping. (2021). How do the latest Australian tax law changes impact your business?. Retrieved from https://www.agibookkeeping.com.au/how-do-latest-australian-tax-law-changes-impact-your-business