August 2022 Round Up - The investment 'boosts' explained

The Skills and Training and Technology Boosts announced in the 2022-23 Federal Budget have made a reappearance in exposure draft form – we explore the details of who can access the measures and what expenditure they support.

Members, download the full August 2022 Tax Round Up (login first) from the member-only website. To see what Knowledge Shop membership offers, call the team on 1800 800 232 or take an online tour.

Inside this month Michael Carruthers (Tax Director), Matthew Tse (Tax Adviser), and Lisa Armstrong (Managing Director) bring you:

Revival of the 120% training and technology boost measures

In the 2022-23 Federal Budget, the former Government announced it would introduce a Skills and Training Boost, and a Technology Investment Boost for eligible expenditure by businesses with aggregated turnover below $50m. These measures have re-emerged in as exposure drafts. We explore the timing, access and the issues with each of the boosts - read the overview of these measures on our blog The 120% deduction for skills training and technology costs.

Tax status of COVID-19 Grants 

Determining which COVID grants are tax free is difficult. For example, when some Governments extended grants into new tranches, the regulations did not keep pace so you we have some grants, effectively for the same purpose, being tax-free and others taxable. A new legislative instrument has been released that lists additional State Government COVID-19 related grants that qualify as non-assessable non-exempt (NANE) income in the hands of the recipient. We give you the latest.

See also TaxBanter’s blog The tax status of COVID-19 grants, for an updated consolidated list of grants that have been declared eligible for NANE treatment.

Can tax-free COVID grants be distributed tax-free to shareholders?

Keeping to the theme of tax-free COVID grants, one issue that keeps cropping up on Knowledge Shop’s help desk is whether tax-free government grants such as the cashflow boost, can be distributed to shareholders tax-free. We take you through the detail of a recently released private ruling that sheds some light on the issue.

Knowledge Shop's Tax Director, Michael Carruthers also explored this issue in Accountants Daily - What becomes of COVID cash when a company winds up?

Removal of the $250 self-education expenses threshold

Legislation before Parliament removes the non-deductible $250 self-education expenses threshold. We look at the practical impact of Treasury Laws Amendment (2022 Measures No.2) Bill 2022. We look at the details.

Impending changes for business

There are a series of changes for business taxpayers flagged. These include:

• Exclusions from the two-year amendment period. Treasury has released draft regulations that would exclude certain taxpayers with complex tax affairs or significant international tax dealings from accessing the two-year amendment period for small and medium business entities. These taxpayers would be subject to the standard four-year amendment period instead. The change is intended to apply to income tax returns for the 2022 income year and later years. The draft regulations indicate that a taxpayer would not qualify for a two-year amendment period if they:
  • Have transactions between related parties that relate to assets or non-cash benefits with a market value of at least $50,000.
  • Derive assessable income of at least $200,000 from a foreign source. To prevent structuring arrangements being undertaken to avoid the four-year period, the $200,000 threshold would be assessed as a combined threshold including the assessable income from the relevant entity and certain related entities.
  • Are either foreign controlled Australian entities (as defined for thin capitalisation purposes) or non-resident entities.
  • Engage in schemes captured by either the Diverted Profits Tax (DPT) or Multinational Anti-Avoidance Law (MAAL).
  • Have at least 10 other connected entities or affiliates.
  • May be entitled to the R&D tax offset or certain related deductions, recoupments, and adjustments.
  • Have applied CGT rollover relief under the interposed holding company rules in Division 615, the demerger rollover provisions or the Subdivision 126-B rollover rules.
  • Are subject to Division 855 (which allows foreign residents to disregard a capital gain or loss in some circumstances).
• Thin cap changes - Treasury has released a consultation paper with proposed amendments to the thin capitalisation rules, the introduction of a new rule limiting deductibility of payments relating to intangibles and changes relating to tax transparency. The proposed amendments modify the ‘safe harbour debt amount’ in line with an OECD proposal that directly limits net interest deductions to 30% of EBITDA). This would replace the existing asset-based safe harbour test (60% of net assets).
  

  When it comes to the proposed new rule which would impact on deductions claimed for payments relating to intangibles and royalties the Government is seeking to address concerns that multinational groups can shift profits to low or no tax jurisdictions to avoid paying tax in Australia. The growth of the digital economy appears to have exacerbated the problem in this area.

  The Government is also considering the enhancement of tax transparency by multinational groups by requiring the public reporting of certain tax information on a country-by-country basis, mandatory reporting of material tax risks to shareholders and requiring firms tendering for Australian Government contracts worth more than $200,000 (inclusive of GST) to state their country of domicile for tax purposes.

Change is a constant for the profession. The Knowledge Shop membership can help you and your team keep ahead of change with an advisers' help desk, workpaper knowledge base, quarterly PD, and more - wherever you are and however you are working. Book in a time for a tour or call Jasmine on 1300 378 950.

Enjoy!