Yesterday’s Australian Federal Budget shows Australia on a strong path to recovery following the COVID-19 related disruption of 2020. However, like New Zealand, the role of the Australian Government in cushioning the blow means significant budget deficits and high debt will linger for some time.
The key policies in the 2021 Australian Budget include:
- A$3.4 billion of new spending commitments towards women’s safety, health, and economic wellbeing.
- A$1.6 billion of new spending commitments under Australia’s Technology Investment Roadmap to reduce carbon emissions and A$1.2 billion for climate adaptation projects (including projects that support public and private disaster risk reduction and resilience).
- A$15 billion of new spending commitments for rail, freight and community infrastructure.
- New individual tax residency rules, with a primary 183-day physical presence test and, if that is not met, secondary tests based on a combination of presence and other objective criteria.
- Extending tax reductions for low- and middle-income earners (worth up to A$1,080) to 2021-22.
For business with turnover of less than A$5 billion:
- Extending company tax loss carry back to 30 June 2023. This means tax losses generated in 2022-23 can be carried back for offset against taxable income in the 2018-19 or later years.
- Extending immediate tax expensing of depreciable assets acquired after 6 October 2020 to 30 June 2023.
- A new 30% refundable R&D tax credit for digital games development.
- A new “patent-box” tax regime from 1 July 2022, with a concessional 17% tax rate applying to income from Australian owned and developed patents by companies in the medical and biotech industries (with possible future extension to the renewables sector).
- Allowing businesses to self-assess the depreciation period for intangible assets, such as patents, registered designs, and in-house software, from 1 July 2023.
For the financial services industry, the introduction of a new Corporate Collective Investment Vehicle (“CCIV”), which will allow flow through tax treatment for investors, aligning Australia’s legal funds structure options with those in the rest of the world.
For full details on the Australian budget, you can read KPMG Australia’s commentary here.