Small business skills and training boost
The Treasury Laws Amendment (2022 Measures No. 4) Act 2023 provides for a temporary skills and training boost for small businesses in the form of a bonus deduction. Small businesses (with an aggregated annual turnover of less than $50 million) can claim the bonus deduction as an additional 20% deduction, on top of their ordinary deduction, for expenditure incurred for the provision of external training courses to employees by certain registered training providers in Australia.
It applies to eligible expenditure incurred from 7:30 pm (AEDT) on 29 March 2022 until 30 June 2024. Special rules provide for the income year in which the bonus deduction can be claimed.
Small business technology investment boost
The Treasury Laws Amendment (2022 Measures No. 4) Act 2023 provides for a temporary technology investment boost for small businesses in the form of a bonus deduction. Small businesses (with an aggregated annual turnover of less than $50 million) can claim the bonus deduction as an additional 20% deduction, on top of their ordinary deduction, for eligible business expenditure incurred for the purposes of their digital operations or digitising their operations. This includes expenditure on a depreciating asset provided the asset was first used or installed ready for use by 30 June 2023. The maximum additional deduction is $20,000 per income year.
It applies to eligible expenditure of up to $100,000 per income year incurred from 7:30 pm (AEDT) on 29 March 2022 until 30 June 2023. Special rules also apply if claiming the bonus deduction for eligible expenditure on a depreciating asset.
Franked distributions funded by capital raising
This measure is not yet law.
The Treasury Laws Amendment (2023 Measures No. 1) Bill 2023External Link amended Income Tax Assessment Act 1997 to add distributions funded by capital raising to the list of distributions that are unfrankable.
A distribution by an entity is funded by capital raising if, broadly:
- the distribution is not consistent with an established practice of the entity of making distributions of that kind on a regular basis
- there has been an issue of equity interests in the entity or another entity, and
- it is reasonable to conclude in the circumstances that
- the principal effect of the issue of any of the equity interests was to directly or indirectly fund some or all of the distribution
- any entity that issued or facilitated the issue of any of the equity interests did so for a purpose (other than an incidental purpose) of funding the distribution or part of the distribution.
The amendments apply to distributions made on or after 15 September 2022.
Off-market share buy-back
This measure is not yet law.
The Treasury Laws Amendment (2023 Measures No. 1) Bill 2023External Link aligns the treatment for shareholders that participate in off-market share buy-backs undertaken by listed public companies with that currently applied to on-market share buy-backs. It also amends the income tax law in respect of selective share cancellations for shareholders to ensure alignment of tax treatment across capital management activities for listed public companies.
The result of this change is that no part of the purchase price in respect of an off-market share buy-back undertaken by a listed public company is taken to be a dividend. A distribution by a listed public company that is consideration for the cancellation of a membership interest in itself, as part of a selective reduction of capital, is unfrankable.
A company that undertakes an off-market buy-back or selective share cancellation after the measure takes effect may be required to debit the balance of its franking account.
The amendment applies to buy-backs undertaken by listed public companies that are first announced to the market after 7:30 pm, by legal time in the Australian Capital Territory, on 25 October 2022, and to selective cancellations undertaken by listed public companies that are first announced to the market on or after 16 February 2023.
Digital games tax offset
The Treasury Laws Amendment (2022 Measures No. 4) Act 2023 provides for the digital games tax offset (DGTO).
The DGTO is a refundable tax offset for eligible expenditure incurred in developing digital games in Australia. The amount of the offset is 30% of a company’s total ‘qualifying Australian development expenditure’ as determined by the Minister for the Arts.
To be an eligible recipient a company must be an Australian tax resident or a foreign tax resident with a permanent establishment in Australia. An offset can be claimed by a company when the company holds a completion, porting, or ongoing development certificate from the Minister for the Arts.
The maximum amount of the offset that can be claimed is $20 million in an income year. The maximum amount applies not only to a company but also extends to any other company that is connected with, or is an affiliate of, the company. The head company of a consolidated group claims the offset for the group for the relevant income year.
The offset applies to qualifying expenditure incurred from 1 July 2022.
Offshore banking unit regime 2024
On 13 September 2021, the Amending Australia's Offshore Banking Unit (OBU) Regime became law. The government removed the concessional tax treatment for OBUs in respect of offshore banking activities, effective from the commencement of the OBU's 2023–24 income year. Rules that deem an OBU to have only paid one-third of its foreign income tax on its offshore banking income will also no longer apply, meaning that its foreign income tax offset will be calculated using the ordinary rules.
The interest withholding tax exemption for OBUs will also be removed for interest paid on or after 1 January 2024.
Commonwealth penalty unit increase
The Commonwealth penalty unit amount increased from $275 to $313 on 1 July 2023. The increase applies to offences committed on or after 1 July 2023. This is due to the indexation which occurs every 3 years in line with the Consumer Price Index (CPI).
The government increased the amount of the Commonwealth penalty unit amount from $222 to $275 on 1 January 2023. The increase applies to offences committed between 1 January 2023 and 30 June 2023. The penalty unit increase was announced in the 2022–23 Budget.
New labels in the Company tax return 2023
In the company tax return 2023, the following have been added, at:
- Item 7 Reconciliation to taxable income or loss
- label 7J – Small business skills and training boost
- label 7L – Small business technology investment boost
- Item 13 Losses information
- There are 9 additional labels for Loss carry back 2022–23.
Removed labels in the Company tax return 2023
In the company tax return 2023, the following labels have been removed at the Calculation statement:
- label M R&D recoupment tax
- label H1 Credit on interest for early payments – amount of interest.
Interest on early payments (IEP) has now been automated for eligible early payments made from 1 July 2021. As a result, there is no longer a requirement for clients to complete label H1 in the tax return to claim a refund of their IEP.
A summary of key changes and new measures affecting your clients when lodging 2023 company tax returns.