Question:
Annual Leave
Answer:
Recent changes are outlined below:
July 1, 2022
- Loss carry back for eligible companies extended to cover 2023 income year.
- Professional firm profits diverted to the professional's spouse or other associates to be reviewed under new Tax Office guidance.
- Corporate collective investment vehicle legislative regime introduced.
- Temporary full expensing of depreciating assets extended to include 2023 income year.
- Depreciable assets of a company joining a tax consolidation group have tax costs setting rules modified for assets depreciated under temporary full expensing rules.
December 9, 2021
- Reduced Pandemic leave disaster payment of $750 per week made available through to 30 June 2022.
August 5, 2021
- COVID-19 Disaster Payments are non-assessable non-exempt income in 2021 income year and later. Payments phasing out as vaccination rates increase.
July 1, 2021
- New Investment Engagement Service launched for businesses planning significant new investments in Australia.
- Tax Office small business independent review service made permanent for businesses with turnover < $10m, for income tax, GST, exercise, luxury car tax, wine equalisation tax and fuel tax credits. Requested before amended assessment issued.
- Small business income tax offset for individuals increased to provide a reduction of 16% for a tax payable up to $1,000.
- Self-managed superannuation funds can now have six members, increased from four members previously.
July 1, 2021
- Some COVID -19 state and territory business grants received by small and medium enterprises are non-assessable, non-exempt income for 2021 and 2022 income years.
- Certain state, territory and local government financial support for individuals and businesses suffering COVID-19 impacts made exempt where businesses have turnover less than $50 million and only in eligible programs.
March 31, 2021
- JobKeeper payments scheme ended.
October 5, 2020
- Boosting apprenticeship commencements subsidy (up to 50% of apprentice's wages) is assessable income.
June 4, 2020
- Homebuilder grant for new home or substantial renovation construction is not subject to income tax.
April 1, 2020
- COVID-19 cash flow boost payments are not subject to income tax
Question: Our company pays the annual leave loading to employees when they take their annual leave. They do not have an entitlement to that leave loading until the annual leave is actually taken. If employees terminate, the leave loading is not payable.
Will the leave loading form part of our deductible annual leave expense when we raise the provision for annual leave at the year end? Or, does it only become deductible at the time the employees take the leave and the loading is paid?
Answer: Annual leave and leave loadings are only deductible when actually paid either direct to the employee or to a purchaser of the business when taking over the employees and their associated leave liability.
In the latter case, the payment is known as an accrued leave transfer payment. Section 26-10 of the 97 Tax Act provides:
You cannot deduct under this Act a loss or outgoing for long service leave, annual leave, sick leave or other leave except:
…An amount paid in the income year to the individual to whom the leave relates …; or
An accrued leave transfer payment that is made in the income year.
Hence, although your accounts correctly include a provision for annual leave, this amount cannot be claimed as a deduction until actually paid to the employees.
