Tax Alert September 2021

Although smaller businesses are now enjoying a lower corporate tax rate, their quarterly super bills have gone up, following the latest indexed rise in the Super Guarantee rate.

Here’s a roundup of some of the other key developments when it comes to the world of tax.

SME tax rate drops

With business conditions remaining tough, small and medium companies will welcome the lower corporate tax rate applying from 1 July 2021. Businesses with a turnover under $50 million are now only up for tax of 25 per cent.

This reduction was part of legislation passed back in 2018 to gradually reduce the corporate tax rate from 27.5 per cent to 25 per cent.

More small companies are eligible for this lower rate as the turnover threshold to access a range of tax concessions has been lifted from $10 million to $50 million.

Reminder on SG increase

If you are an employer, don’t forget the Superannuation Guarantee (SG) rate increased by 0.5 per cent on 1 July 2021, making the annual rate 10 per cent.

When paying SG contributions for the July to September quarter for your employees, check your calculations are based on the new, higher rate to ensure you don’t run into problems with the ATO.

The higher SG rate may also increase your Workcover premiums and payroll tax liability.

Tax status of COVID-19 grants

If your business is taking advantage of the financial support provided by state and territory governments during pandemic lockdowns, it’s essential to check the strict tax rules covering these grants.

Most of these financial supports have been given a concessional tax status and are classed as non-assessable non-exempt (NANE) income, but only grants paid in the 2020-21 and 2021-22 financial years currently qualify.

For the grant to qualify for NANE income tax status, your business’s aggregated turnover for the current year must be under $50 million. You are also required to be carrying on a business in the current financial year and the grant program must be declared an eligible grant through a legislative instrument.

Continuation of full expensing and loss carry-back

In more good news, eligible business taxpayers who took advantage of the government’s full expensing and loss carry-back measures in the past financial year will be able to use them again this financial year.

The temporary full expensing regime was introduced to help businesses with an aggregate annual turnover of under $5 billion to cope with the financial challenges of the pandemic. Eligible businesses can deduct the full cost of any eligible depreciable assets purchased after 6 October 2020.

Similarly, eligible companies will also be able to carry-back tax losses from the current income year (2021-22) to offset previously taxed profits going as far back as 2018-19 when they lodge their business tax return.

FBT exemption for retraining and reskilling

The ATO is reminding employers that if they provide training or education to employees who are made redundant, or soon to be redundant, the cost is exempt from fringe benefits tax (FBT).

Eligible employers using the exemption are not required to include the retraining in their FBT returns, or in the reportable fringe benefits listed in the employee’s Single Touch Payroll reporting or payment summary.

You are, however, required to keep a detailed record of all the training and education provided if you intend claiming this exemption.

Changes to SuperStream

And finally, a reminder that from 1 October 2021, self-managed super funds (SMSFs) will only be able to roll member benefits into and out of their fund using SuperStream. Some electronic release authorities will also need to be processed using SuperStream.

SMSF trustees need to ensure their fund will be ready to meet the new requirements by checking the details recorded with the ATO are up-to-date for both the fund and its members.

Trustees should also check they have provided the ATO with details of the fund’s ABN and unique bank account for super payments.