RESEARCH & DEVELOPMENT TAX INCENTIVE
The R&D Tax Incentive offers significant benefits to innovative firms, both big & small.
The deadline to register eligible R&D is four months from end of financial year, being the 30th of April.
However, as that date falls on a weekend this year that in some states is followed by a public holiday, the due date is 11:59pm on Tuesday the 2nd of May 2023.
With that date fast approaching, firms need to review their eligibility and start work on their application or risk missing out.
From the 2022 financial year, the R&D Tax Incentive consists of a tax offset for eligible R&D expenditure calculated as:
- Firms with annual turnover of less than $20M – A refundable tax offset based on the company tax rate plus 18.5%. In most instances, this means that the tax offset continues to be 43.5%.
- Firms with annual turnover of $20M or more – A non-refundable tax offset based on R&D intensity of:
- 0% to 2% intensity: the company tax rate plus an 8.5% premium; and
- >2% intensity: the company tax rate plus a 16.5% premium.
The tax offset can only be claimed for expenditure incurred in relation to “core activities” and “supporting activities”.
Core activities are experimental activities whose outcome cannot be known or determined in advance on the basis of current knowledge, information or experience, but can only be determined by applying a systematic progression of work that:
- is based on principles of established science; and
- proceeds from hypothesis to experiment, observation and evaluation, and leads to logical conclusions; and
- that is conducted for the purpose of generating new knowledge (including new knowledge in the form of new or improved materials, products, devices, processes or services).
Supporting activities are activities that do not constitute core activities, but that are directly related to core R&D activities.
For further information on the R&D Tax Incentive, please refer to AusIndustry’s Guide to Interpretation.
If you need more information on the R&D Tax Incentive, or require assistance to complete an application, please get in touch.
NEW WORKPLACE SEXUAL HARASSMENT LAWS
The Fair Work Act has been amended to prohibit sexual harassment in connection with work with effect from the 6th of March 2023.
Historically, the law on sexual harassment has been governed by state-based legislation such as the Victorian Equal Opportunity Act 2010 and the Federal Sex Discrimination Act 1984.
The amendments to the Fair Work Act seek to add to and strengthen the existing protections against sexual harassment which predominantly occurs within the workplace.
The new Fair Work Act protections apply to:
- workers including employees, contractors, work experience students and volunteers;
- future workers; and
- people conducting a business or undertaking.
The amendments mean that a person or company can now be liable for sexual harassment conducted by an employee or agent in connection with work.
This liability applies unless the person or company can prove that they took all reasonable steps to prevent the sexual harassment.
This places a higher responsibility on employers to ensure that sexual harassment does not take place in their workplace.
The amendments also provide the Fair Work Commission greater powers to deal with workplace sexual harassment. In addition to its existing ‘stop sexual harassment order’ powers, the FWC can deal with disputes about sexual harassment by:
- Conciliation;
- Mediation; or
- Making a recommendation or expressing an opinion.
Where a dispute can’t be resolved these ways, the FWC may also be able to deal with the dispute by arbitration if the parties agree. In this scenario, the FWC can make an order:
- for compensation or lost wages; or
- requiring a person to do something that’s reasonable to remedy any loss or damage suffered.
Employers are encouraged to get up to speed with the new law and to use it as an impetus to raise awareness and vigilance throughout their organisations.
Further information on the new law can be found on the Fair Work Ombudsman’s website. And of course, anyone with specific questions can get in touch with us for assistance.
FRINGE BENEFITS TAX 2023
Fringe Benefits Tax (FBT) is a tax payable by employers on non-cash benefits provided to employees.
This is essentially any benefit provided to employees beyond their normal salary and superannuation.
Common examples of Fringe Benefits are:
- Private use of vehicles;
- Car parking;
- Provision of entertainment;
- Payment/reimbursement of private expenses;
- Provision of loans;
- Provision of goods/services from the business; and
- Living Away From Home Allowances (LAFHA).
Where an employer provides Fringe Benefits to employees, those benefits must be valued in accordance with the legislation, and the employer (not the employee) then pays FBT at the rate of 47% on the “grossed-up” amount.
The effect of this methodology can be a FBT liability that is almost as much as the cost of the benefit provided. For example the FBT on a benefit of $1,000 can be as much as $978.
There are a number of exemptions & concessions that can be accessed by employers to reduce or eliminate the FBT liability. For example, low value benefits (< $300) may be eligible for the Minor Benefits exemption.
There are also specific rules, concessions & exemptions that apply to employers operating in the not-for-profit sector and a new targeted Electric Cars Exemption that create unique salary packaging opportunities.
With the FBT year ending on the 31st of March 2023, employers should be taking steps to ascertain their FBT position and to prepare to lodge a FBT return where necessary. This includes ensuring that record keeping requirements are met.
For example where the ‘operating cost’ method is used for motor vehicles, it is necessary to ensure that there is an odometer reading taken on the 31st of March and that a valid logbook is in place.
If you need assistance to understand your business’s FBT obligations, or to prepare the FBT return, please get in touch.
We can also provide strategic advice on how to maximise salary packaging opportunities and to legally minimise the FBT exposure of your business.
PAYROLL TAX & ‘TENANCY AGREEMENTS’
A common arrangement in the medical, allied health and dental industries involves health practitioners that conduct business from premises controlled by a practice operator.
These arrangements are often referred to as ‘tenancy agreements’ that typically involve the practitioner utilising rooms, accessing support/administrative services and other peripheral items provided by the practice operator.
The practitioner will typically contract with the practice operator for these items and also appoint the practice operator as an agent to collect consultation/treatment fees on their behalf.
The practice operator will then periodically remit fees collected to the practitioner less a service fee that is typically 30-40% of fees collected.
Historically, the prevailing view has been that the practitioner is operating their own business and is neither an employee nor a party operating under a relevant contract.
Hence, practice operators have not paid Payroll Tax on the remittances made to the practitioner.
However, a recent decision of the NSW Court of Appeal in the Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue case has confirmed the position that such arrangements will be considered to be ‘relevant contracts’ and NSW Payroll Tax will be payable.
This decision follows on from the Victorian The Optical Superstore Pty Ltd & Ors v Commissioner of State Revenue case in which a similar view was held.
The Queensland Government has acknowledged that this outcome represents a significant shift in the previously accepted position and has announced an amnesty specifically for GPs to 30 June 2025.
No other state has opted to go down this path with the expectation that practices will take steps to ensure compliance immediately.
We note that state Governments are being lobbied to intervene and amend the law to exclude these ‘tenancy agreement’ arrangements from being treated as relevant contracts.
The most vocal lobbying is currently coming from the Royal Australian College of General Practitioners (RACGP) which is running a stop the sick tax campaign.
Whilst the outcome is not what many hoped for or expected, the law is now sufficiently settled. This means that practitioners and practice operators should be taking steps to review their positions to ensure that they are compliant.
If you have questions about what the Thomas and Naaz decision means for your arrangements, and the actions that may be required, please get in touch.
INCOME TAX LODGEMENT DEADLINE
When self-preparing income tax returns, taxpayers typically have until the 31st of October to lodge with the Australian Taxation Office.
For those who use a Tax Agent (eg Sky Accountants) to lodge their income tax return, the due date is extended. In most instances that extended due date will be the 15th of May 2023.
Individuals and trusts can automatically access a short extension of that due date to the 5th of June 2023 provided that any tax payable is also paid by that date.
With those due dates fast approaching, we encourage those who are yet to lodge their 2021/22 income tax return to get in touch.
And for anyone who needs additional time, please talk to us about options to apply to the Australian Taxation Office for a deferral.
QUOTE OF THE MONTH
It seems to us that there is an abundance of problems in our lives today.
We have problems on a global scale like the Ukrainian conflict, a global pandemic, economic woes and climate change.
On-top of all that, we each have all of our own personal problems to contend with.
Is it any wonder that the Australian Bureau of Statistics’ National Study of Mental Health and Wellbeing continues to show that mental health issues are a significant issue with one in five people having experienced a mental disorder during the most recent twelve month reference period.
In this context, an ability to resolve and manage problems can make a world of difference. However, many problems are beyond our control and cannot easily be resolved.
When this is the case, the words of American author and psychotherapist Virginia Satir are particularly relevant.
Satir is quoted as having said, “problems are not the problem; coping is the problem”.
What we believe Virginia is getting at is that problems are an inescapable reality of life and that it is important to develop the ability to cope with them.
Beyond seeking to resolve our problems, we must also seek to cultivate our resilience and develop healthy coping mechanisms.
It is these skills that allow us to lead a happy, healthy and productive life notwithstanding the problems that we will inevitably encounter.
Sky Accountants Ballarat
Phone: 03 5332 8855
Office Address: 902 Howitt Street, Wendouree, Victoria 3355, Australia
Postal Address: PO Box 2234, Bakery Hill, Victoria 3354
Sky Accountants Gisborne & Macedon Ranges
Phone: 03 5428 1400
Office Address: 45 Hamilton Street, Gisborne, Victoria 3437, Australia
Postal Address: PO Box 270 Gisborne Victoria 3437