Insight,

Federal Budget 2022-23: Corporate Tax

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The Government has included in this year’s Budget a number of targeted corporate tax measures that are focused on providing tax relief for businesses, supporting job creation and improving employee skill base. There are also a number of technology concessions including expanding the patent box concessional regime and concessional measures as part of the COVID-19 response package. There are no broad ranging tax reform measures and prior year concessions such as full expensing of capital assets and loss carry back rules continue as previously announced.t sector and low emissions technology innovations

The Government has announced the expansion of the patent box concessional regime, previously announced in the 2021-22 Budget (see more here) and currently before Parliament to:

  • support practical, technology focused innovations in the Australian agricultural sector - the patent box concessions will now apply to 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); and
  • support the Government’s technology focused approach to reducing emissions in line with the Government’s target to achieve net zero emissions by 2050 – this 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 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.

Australia currently taxes profits generated by PBRs, patents on agvet products and by patents on low emissions technologies at the headline corporate rate (30% for large businesses and 25% for small enterprises). The patent box will offer a competitive tax rate for profits generated from eligible Australian owned and developed patents, supporting the commercialisation of innovation in Australia.

The Government will consult with industry before settling the detailed design of the patent box expansion to agriculture and low emissions technologies.ss grants non-assessable non-exempt income

The Government has extended the measure which enables payments from certain state and territory COVID‑19 business support programs to be made non‑assessable non‑exempt (NANE) for income tax purposes until 30 June 2022. This measure was originally announced on 13 September 2020.

The Government has made the following state and territory grant programs eligible for this treatment since the 2021‑22 MYEFO:

  • New South Wales Accommodation Support Grant; 
  • New South Wales Commercial Landlord Hardship Grant;
  • New South Wales Performing Arts Relaunch Package;
  • New South Wales Festival Relaunch Package;
  • New South Wales 2022 Small Business Support Program;
  • Queensland 2021 COVID‑19 Business Support Grant;
  • South Australia COVID‑19 Tourism and Hospitality Support Grant; and
  • South Australia COVID‑19 Business Hardship Grant.

The Government has confirmed that fringe benefits tax (FBT) will not be incurred by businesses where COVID‑19 tests are provided to employees for the purpose of attending a place of work and that the cost of taking a COVID‑19 test for individuals will be tax deductible with effect from 1 July 2021.

This measure was previously announced by the Minister for Housing and Assistant Treasurer on 8 February 2022.

The Government has affirmed the commitment it made in last year’s Federal Budget to reform the corporate rules regulating offers of employee share schemes (ESSs).  Since last year’s announcement, the Government has held two rounds of public consultation regarding the proposed ESS reforms (our previous alert regarding the exposure draft legislation for the first round of public consultation is available here). 

The Budget confirms some of the previously announced reforms to the corporate rules regulating ESSs.  As part of this, the Budget has restated the Government’s commitment to the thresholds for ESSs that are offered by unlisted companies where monetary consideration is provided by employees.  Under these measures, participants in the ESS of an unlisted company can invest up to:

  • $30,000 per participant per year, accruable for unexercised options for up to 5 years, plus 70% of dividends and cash bonuses; or
  • any amount, if it would allow them to immediately take advantage of a planned sale or listing of the company to sell their purchased interests at a profit.

The Government has expressed its intention to expand the scope of the proposed exemptions for employee equity interests with no monetary consideration.  As part of this, the Government has committed to removing regulatory requirements for ESS offers to independent contractors, where no monetary consideration is provided.

The continuing commitment to the improvement to the access to employee ownership is very helpful.  The detail of the legislation when introduced will have a significant impact on its potential benefits and impact for employees, and will build on the legislation introduced earlier in the year to remove the deferred taxing point on ESS interests.

In accordance with comments made by the Treasurer on Friday 25 March 2022, the Government is expecting to release further detail regarding the proposed ESS reforms shortly.

Primary Producers – increasing concessional tax treatment for carbon abatement and biodiversity stewardship income

The Government will allow the proceeds from the sale of Australian Carbon Credit Units (ACCUs) and biodiversity certificates generated from on-farm activities to be treated as primary production income for the purposes of the Farm Management Deposits (FMD) scheme and the tax averaging provisions from 1 July 2022.

The Government will also change the taxing point of ACCUs for eligible primary producers to the year when they are sold, and extend similar treatment to biodiversity certificates issued under the Agriculture Biodiversity Stewardship Market scheme, from 1 July 2022. Eligible primary producers are those who are currently eligible for the FMD scheme and tax averaging.

Currently, proceeds from selling ACCUs are treated as non-primary production income and are generally ineligible for concessional tax treatment under the FMD scheme or tax averaging. ACCU holders are taxed based on changes in the value of their ACCUs each year, which can result in tax liabilities before sale.

Boosting Apprenticeship Commencements wage subsidy – expansion

The Government has expanded the apprenticeship wage subsidy measures announced in the 2021‑22 MYEFO and 2021‑22 Budget, extending the Boosting Apprenticeship Commencement (BAC) and Completing Apprenticeship Commencements (CAC) wage subsidies by 3 months to 30 June 2022.

The Budget includes $954.0 million in funding over 5 years to introduce a new Australian Apprenticeships Incentive System from 1 July 2022 as support to employers and apprentices in "priority occupations". Apprentices and trainees in "priority occupations" will also receive a direct payment of up to $5,000 over two years to assist with the cost of undertaking an apprenticeship.

The "priority occupations" will be based on a new ‘Australian Apprenticeships Priority List’, which includes workers in the aged care, childcare disability and nursing.

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