The Assistant Minister for Road Safety and Freight Transport, Scott Buchholz, is adamant that the Federal Budget will stimulate investment and boost jobs.
He estimates this funding will help one million companies that employ 8.8 million workers that were profitable before the Covid-19 pandemic.
“This budget is about supporting industries, like the transport industry, that were profitable and tax paying but now find themselves in a loss position due to the Covid-19 pandemic,” said Buchholz.
The Liberal National Government, according to Buchholz, is supporting the transport sector by allowing eligible companies to access their losses earlier, by way of a cash refund.
“This measure will provide the business with a much needed cash flow boost to keep their business running, retain their workers and invest with confidence in the future,” said Buchholz.
“Cashflow is a primary concern for most businesses already adversely impacted by Covid-19, these measures will allow the companies to choose to ‘carry-back’ tax losses made in the 2019-20, 2020-21 and 2021-22 income years to be offset against tax paid in relation to the 2018-19 or later income years.”
This loss carry-back measure is reported to be optional and follows the instant asset write-off and temporary full expensing which became available on 7 October 2020.
There is no monetary cap on the amount of the tax offset that can be claimed. The tax offset is essentially only limited to the amount of tax paid in relation to the previous income year(s).
Buchholz has also shared a brief case study as an example of the Budget in action.
Bogong Builders Pty Ltd has aggregated annual turnover of $60 million for the 2021-22 income year. On 1 July 2021, Bogong Builders Pty Ltd purchased a new truck-mounted concrete pump for $1 million, exclusive of GST. Before the purchase the taxable income for 2021-22 was $600,000.
Without the temporary full expensing, Bogong Builders Pty Ltd would claim a tax deduction of around $300,000, resulting in a taxable profit of $300,000 and a tax bill of $90,000.
Now Bogong Builders pty Ltd will instead deduct the full cost of the asset $1 million, resulting in a tax loss of $400,000.
Under the temporary loss carry – back Bogong Builders Pty ltd chooses to offset this tax loss against profits in 2018-19, resulting in a tax refund of $120,000.
Without the refund, the company may have to defer the investment until their cash flow position recovered, or may not have purchased the new pump at all.
Details for the accountant to refer to on the Fact Sheet Link under Lower Taxes are available here.
(Image: Assistant Minister for Road Safety and Freight Transport, Scott Buchholz.)