Three announcements in this year’s federal budget are particularly good news for accountants and their clients: the extension of the instant asset write-off provision, the temporary loss carry back provision, as well as $15.3 million in funding for e-invoicing.
Accountants and their clients benefit from 2021-22 federal budget
Accountants and their clients are likely to remember the 2021-22 budget for a very long time. In it, the federal government committed to a huge range of spending measures to support the post-COVID economic recovery, in particular an extra $15 billion for the $110 billion already set aside for infrastructure projects.
In the same way they were instrumental in supporting their clients to access the very generous JobKeeper wage subsidy in 2020, accountants will play a key role this year helping clients to understand and access the measures outlined by federal Treasurer Josh Frydenberg on budget night.
1. Instant asset write-off provision extended
In his budget speech, Mr Frydenberg announced businesses will continue to be able to depreciate the full value of eligible assets they buy for the next two years. This will encourage businesses to invest for the future without needing to take a hit to cash flow.
“Over 99 per cent of businesses, employing over 11 million workers, can write off the full value of any eligible asset they purchase. This has seen their spending on machinery and equipment increase at the fastest rate in nearly seven years,” said Mr Frydenberg.
“So, tonight, we again go further, announcing the extension of these measures for a further year until June 30, 2023, so a tradie can buy a new ute, a farmer a new harvester and a manufacturer expand their production line.”
Simeon Duncan, senior manager, international corporate affairs at Intuit QuickBooks, was fortunate to attend a federal government briefing immediately after the announcement, during which Prime Minister Scott Morrison explained the rationale behind the measures outlined in the budget.
“At the event the Prime Minister Scott Morrison noted the point of the budget was to encourage businesses to invest, create jobs and rebuild the economy. So, the instant asset write-off provision helps give small businesses the confidence to invest, which is at the heart of the Coalition’s economic plan,” he says.
2. Extension of the temporary loss carry back provision to 2023
As professional services firm Wolters Kluwer’s report[1] explains, the federal budget has extended the temporary loss carry back offset by one year to apply to 2022-23 income year losses.
The report explains, “Eligible corporate tax entities with aggregated turnover less than $5 billion will be able to carry back losses from the 2022-23 income year to offset previously taxed profits made in or after the 2018-19 income year. The loss that can be carried back is limited by the amount of earlier taxed profits and cannot generate a franking account deficit. Eligible companies can elect to carry back losses under this measure for any or all of the 2019-20 to 2022-23 income years.”
The federal government’s budget fact sheet[2] explains, this provision encourages Australian businesses to invest, grow and create more jobs. The initiative was first announced in the 2020/21 budget to help businesses get through the pandemic.
The purpose of this measure is to incentivise businesses to invest to access this tax benefit. The Coalition says the extension of the temporary full expensing and loss carry-back measures should deliver $20.7 billion in tax relief to businesses over time and
builds on the substantive support provided in the 2020-21 federal budget.
Treasury estimates that the temporary full expensing and loss carry-back measures will create around 60,000 jobs by the end of 2022-23 and boost GDP by around $2.5 billion in 2020-21.
3. More funding for e-invoicing
Another big piece of news for accountants and their clients is $15.3 million set aside to encourage businesses to use e-invoicing. This is very welcome news and will assist small businesses to better manage their cash flow.
E-invoicing is the ability to send invoices directly from one organisation’s financial systems to another. It’s the quickest and most cost-effective way to ensure invoices are approved, processed and paid. It does not involve emailing invoices, nor is it a PDF invoice, but rather a direct electronic transmission of data from one party’s system to the other.
The adoption of e-invoicing has great potential to simplify processes and help small businesses get paid faster and manage their cash flow.
Intuit QuickBooks is dedicated to supporting accountants and their small business clients to make the most of this year’s budget measures and streamline tax compliance.
You can learn more about what the federal budget means for your practice at our next virtual event, the QuickBooks Pro Power Hour on Thursday, 27 May 11am–12pm with a key note from Robyn Jacobson, Senior Advocate at The Tax Institute. Register for free today.
[1] The 2021-22 CCH Tax and Accounting Federal Budget Report, 2021, Wolters Kluwer
[2] Tax incentives to support the recovery, Federal Treasury, 2021 https://budget.gov.au/2021-22/content/factsheets/download/factsheet_tax.pdf, accessed 12/05/21
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