Improving the integrity of off-market share buy-backs
The Government will align the income tax treatment of off-market share buy-backs undertaken by listed public companies with the treatment of on-market share buy-backs. This measure is aimed at improving the tax integrity of such transactions to ensure they are not used to obtain a tax advantage for the entities involved. This measure will result in no amount of the purchase price received from these particular off-market share buy-backs being treated as a dividend. This measure will apply from 7:30pm AEDT on Tuesday 25 October 2022. [COMMENT – the real message here is that no amount of an off-market share buy-back will be treated as a dividend, and thus it will not be frankable – for get ‘integrity’ and ‘tax advantages’ – that’s just spin.]
Reversal of the measure allowing taxpayers to self-assess the effective life of intangible depreciating assets
The Government will not proceed with the measure announced in the Federal Budget 2021–22 that would have allowed taxpayers to self-assess the effective life of intangible depreciating assets, such as patents, registered designs, copyrights and in-house software. This announcement means that the effective lives of intangible assets will continue to be set by statute (the rates are prescribed in the table in subsection 40-95(7) of the Income Tax Assessment Act 1997. The objective of this announcement is to avoid the potential integrity concerns with the previously announced measure and contribute to budget repair. It is expected to increase receipts by $550 million over the 4 years from 2022–23.
Electric, Hybrid & Hydrogen cars first provided to employees after 30.6.22 to be exempt from FBT and import tariffs
From 1 July 2022, this measure will exempt battery, hydrogen fuel cell and plug-in hybrid electric cars from import tariffs and fringe benefits tax (FBT), first provided to the employee on or after 1 July 2022 and they have a first retail price below the luxury car tax (LCT) threshold for fuel-efficient cars, which, for 2022–23, is $84,916. Eligible vehicles must not have been held or used before 1 July 2022. Employers will need to include exempt electric car fringe benefits in an employee’s reportable fringe benefits amount. The objective of this measure is to encourage a greater take up of electric cars by Australian road users by making electric cars more affordable and to reduce Australia’s carbon emissions from the transport sector. The measure will be reviewed after three years and is part of the Government’s election commitment as published in the Plan for a Better Future. The measure is contained in the Treasury Laws Amendment (Electric Car Discount) Bill 2022 which was introduced on 27.7.22, made slow progress, is before the Senate (second reading moved 8.9.22). The 27.7.22 Media Release, is here. The Tax Institute’s submission on the proposed measure can be found here. Clayton Utz warns (16.9.22) about aspects of this – including the confounding introduction on state road user charges (in lieu of paying fuel excise, used to fund roads) and the High Court challenge, to those user charges, relying on the Constitutional prohibition, on States raising ‘excise’ duties.
Making COVID-19 business grants non-assessable non-exempt (2 ACT; 10 Vic)
The Government will make certain state and territory COVID-19 grant programs eligible for treatment as non-assessable non-exempt (NANE) income. This will exempt eligible businesses from paying income tax on the following grants:
- Australian Capital Territory HOMEFRONT 3 •
- Australian Capital Territory Small Business Hardship Scheme • Victoria Business Costs Assistance Program Four – Construction •
- Victoria Licensed Hospitality Venue Fund 2021 – July Extension •
- Victoria Licensed Hospitality Venue Fund 2021 – Top Up Payments •
- Victoria Business Costs Assistance Program Round Two – Top Up •
- Victoria Business Costs Assistance Program Round Three
- Victoria Business Costs Assistance Program Round Four •
- Victoria Business Costs Assistance Program Round Five •
- Victoria Impacted Public Events Support Program Round Two •
- Victoria Live Performance Support Program (Presenters) Round Two •
- Victoria Live Performance Support Program (Suppliers) Round Two •
- Victoria Commercial Landlord Hardship Fund 3.
The Tax Institute advocated for this measure in our Incoming Government Brief. This measure will ensure that these payments are not subject to income tax, so that the full benefit of the payment is available to recipients. It will also eliminate confusion and the risk of small businesses being inadvertently exposed to penalties.
[The Tax Institute’s Budget Update 2022/23]
[Tax Month – October 2022 – Previous Month, 5.11.22]