Before you complete your tax return for 2021, there are some changes you should be aware of in case they affect you.
In this section:
- New items on the 2021 Company tax return
- Loss carry back
- Temporary full expensing of depreciating assets
- Backing business investment
- Enhanced instant asset write-off
- Small business entities using the simplified depreciation rules
- Increasing the small business turnover for certain concessions from $10m to $50m
- Change in tax rate for base rate entities
The 2021 Company tax return includes the following new items about backing business investment, instant asset write-off, temporary full expensing and loss carry back:
Item 8 Financial and other information - 3 new labels
- P – Opening franking account balance
- X – Select your aggregated turnover range
- Y – Aggregated turnover
Item 9 Capital allowances - 12 new labels
- P – Are you making a choice to opt out of temporary full expensing for some or all of your eligible assets?
- Q – Number of assets you are opting out for
- R – Value of assets you are opting out for
- S – Temporary full expensing deductions
- T – Number of assets you are claiming for
- U – Are you using the alternative income test?
- V – Are you making a choice to opt out of Backing business investment for some or all of your eligible assets?
- W – Number of assets you are opting out for
- X – Value of assets you are opting out for
- M – First year accelerated depreciation deductions for assets using Backing business investment
- O – Instant asset write-off deductions for non-small business entities
- N – Subsequent year accelerated depreciation deductions for assets using Backing business investment
Item 13 Losses information - 11 new labels
- A – Tax loss 2019–20 carried back to 2018–19
- B – Tax loss 2020–21 carried back to 2018–19
- C – Tax loss 2020–21 carried back to 2019–20
- G – Tax Rate 2019–20
- I – Net exempt income 2018–19
- J – Net exempt income 2019–20
- L – Income tax liability 2018–19
- M – Income tax liability 2019–20
- O – Aggregated turnover in 2019–20: Select your aggregated turnover range
- P – Aggregated turnover
- S – Loss carry back tax offset
In the 2020–21 Budget, the government provides:
- targeted support to businesses, and
- encourage new investment through a loss carry back regime.
Eligible corporate tax entities that:
- previously had a liability to pay corporate income taxes in a relevant income year, and
- subsequently made a tax loss
can claim a refundable tax offset. Tax offsets can be claimed by completing the
- Losses section S item 13 – Loss carry back tax offset.
The measure interacts with the government's JobMaker Plan – temporary full expensing to support investment measure. This allows new investment to generate tax losses which can then be carried back to generate a refundable tax offset for eligible businesses.
Eligible corporate tax entities with less than $5 billion aggregated turnover in a relevant loss year (or the income year before that year) can carry back a tax loss made in 2019–20, 2020–21 or 2021–22 to a prior income year's income tax liability in 2018–19, 2019–20 or 2020–21. The amount of the offset generated is limited by:
- the corporate tax entity's income tax liabilities in the relevant gain years, and
- its franking account balance at the end of the year in which the entity lodges its tax return claiming the offset (the 2020–21 or 2021–22 income year).
In the 2020–21 Budget, the government announced a temporary full expensing incentive to support businesses and encourage new investment.
Businesses with an aggregated turnover of less than $5 billion can immediately deduct the business portion of the cost of eligible new depreciating assets. Corporate tax entities unable to meet the $5 billion turnover test may be eligible for temporary full expensing under the alternative income test. The eligible new assets must be first held, and first used or installed ready for use for a taxable purpose, between 7:30pm AEDT on 6 October 2020 and 30 June 2022.
For businesses with an aggregated turnover of less than $50 million, temporary full expensing also applies to the business portion of eligible second-hand depreciating assets.
Businesses can also immediately deduct the business portion of the cost of improvements to eligible depreciating assets (and to assets acquired before 7.30pm AEDT on 6 October 2020 that would otherwise be eligible assets) if those costs are incurred between 7.30pm AEDT on 6 October 2020 and 30 June 2022.
If an asset qualifies for an immediate deduction under temporary full expensing in an income year, you can choose not to apply temporary full expensing and to claim a deduction using other depreciation rules. However, you must notify us in an approved form (such as using the new items on the company tax return) that you have chosen not to apply temporary full expensing to the asset. Your choice cannot be changed and you must notify us by the day you lodge your tax return for the income year to which the choice relates.
If you are a small business that chooses to use the simplified depreciation rules, you cannot opt out of temporary full expensing.
Backing business investment (BBI)
For 2019–20 and 2020–21, eligible businesses can deduct the cost of eligible new depreciating assets at an accelerated rate using the Backing business investment – accelerated depreciation rules.
For each eligible new asset, the backing business investment – accelerated depreciation deduction applies in the income year the asset is first used or installed ready for use for a taxable purpose.
You claim the deduction when lodging your tax return for the income year. The usual depreciating asset arrangements apply in the subsequent income years the asset is held.
If you are eligible for backing business investment – accelerated depreciation, you can choose to not apply these rules on an asset-by-asset basis but your choice cannot be changed once made. You make the choice in your tax return for the income year in which the choice relates, and you must notify us by the day you lodge your tax return.
If you are a small business that chooses to use the simplified depreciation rules, you cannot opt out of Backing business investment – accelerated depreciation.
If a depreciating asset is not eligible for temporary full expensing or if you opt out of temporary full expensing, the enhanced instant asset write-off rules continue to apply to eligible businesses and eligible assets. However, the time by which the asset must be first used, or installed ready for use, to qualify for the enhanced instant asset write-off has been extended until 30 June 2021, provided the asset was purchased by 31 December 2020.
The instant asset write-off changes also apply to small businesses using simplified depreciation. In addition, a small business using simplified depreciation must deduct the balance of their general small business pool for an income year ending between 6 October 2020 and 30 June 2022.
If you are a small business entity choosing to use simplified depreciation, the temporary full expensing rules with some modifications apply. You cannot opt out of temporary full expensing for assets that the simplified depreciation rules apply to.
If instant asset write-off and temporary full expensing do not apply to an asset of a small business using simplified depreciation, the backing business investment rules may apply to the asset. If backing business investment rules do apply to the asset of a small business using simplified depreciation, it cannot opt out of those rules.
The provisions that prevent small business entities from accessing the simplified depreciation regime for five years if they opt out of that regime continue to be suspended for income years that include 30 June 2021 and 30 June 2022.
A small number of assets are specifically excluded from the simplified depreciation rules. For these assets, you must use the general depreciation rules.
The 2020–21 Budget extended certain small business concessions to businesses with an aggregated turnover of less than $50 million.
From 1 July 2020 newly eligible businesses can immediately deduct:
- certain start-up expenses – for example, professional expenses and legal and accounting advice
- certain prepaid expenditure where the payment covers a period of 12 months or less that ends in the next income year.
The corporate tax rate for base rate entities for 2020–21 is 26%.