Remember Christmas as a kid, when you’re like eight or nine years old? Christmas Eve, you’re that excited to see if Santa’s going to bring you any presents? Well, that’s pretty much how it was for me last night and other tax accountants around the country. We’re that bloody excited! I wore my favourite orange shirt for Budget night. Exciting times indeed.
Budget night – here’s the wrap for small business, brought to you by the Tax Champion and Paris Financial, so here we go. They’ve reinforced the small business entity turnover to access all the concessions for small businesses and increased the turnover from $2 million to $10 million. This was touted in the previous budget and they’ve reinforced it in this budget last night.
Instant Asset Write Off Extension
The next one is an absolute cracker for small business. It was brought in a couple of years ago and the government has just extended it to the 30 June 2019. If you’ve got a small business, with a turnover of less than $10 million, you will be able to immediately write off any new asset with a purchase price of less than $20,000 (ex GST) – enabling you to receive a cash benefit straight away.
For example:
| Government Incentive
$10,000 Asset x 0.275 Company Tax Rate = $2,750 Tax Refund
|
No Incentive
$10,000 Asset Depreciated at over 5 years (ie. $2,000 pa) $550 Year 1 $550 Year 2 $550 Year 3 $550 Year 4 $550 Year 5 |
So over five years, you’ve got the same benefit of $2,750. It’s the same cash amount over five years, but the power is getting the cash immediately and it’s excellent for cash flow for your small business. That’s a ripper and will be good coming up towards the 30 June.
Company Tax Rate
There’s not a huge amount in this budget for small business, which is not surprising as they’ve got an election next year, so we were expecting them to take it a little bit easy. However, they are reducing the company tax rate over the next few years from 27.5% to 25% for trading companies.
The last financial year saw a 2.5% benefit with the tax rate reducing from 30% to 27.5%. The reduction down to 25% will be gradually introduced over the 2018 and 2019 years. Nothing fantastic, I wouldn’t have thought, for small business, however it does affect the paper gold account; the franking account.
GST – Simpler BAS
The streamlined GST. The government has spoken about a streamlined GST system where businesses basically fill out three boxes on a form rather than four or five boxes on a form. I don’t think this is good for small business as it probably just brings in a lack of discipline. I strongly believe that the exercise of preparing your quarterly BAS and filling out those couple of extra boxes (usually capital acquisitions and the GST amounts collected and paid) is a good discipline for small businesses, regardless of whether the business owner or bookkeeper is preparing the BAS. Not much in that one.
Small Business Export Hubs
The government’s put in $20 million into what they’re calling small business export hubs. It’s a spit in the ocean. But look, it’s out there, and if you’re exporting, there might be something in there for you.
R&D
R&D is an old favourite and they’re putting some auditing bucks into this. We have a lot of clients who are innovative and they do access R&D tax concessions via R&D tax specialists.
The government has announced they are putting more money into tax office and industry auditors to ensure this is running properly, nothing wrong with that.
Multinational Anti Avoidance
I’ve got the killer gripe here and it’s slightly out of the small business area. The Australian government is putting a huge amount of money into the multi-national anti-avoidance laws and another thing called the diverted profits tax. If you follow my Killer Series, you’ll find out how widespread this is. You’ve got to compliment the Australian government in their approach and they’re punching above their weight, with trying to tackle multi-national tax. Follow the Killer Series, and you’ll see that there is a little more to that, but at least it’s something.
Black Economy – Cash Payments
Here’s a big one for small business: they’re going to tackle the black economy in a few ways and I believe this is good for small business. The government is going to be more stringent on ABN’s, directors responsibilities in small businesses and tracking cash payments.
It has been proposed in this budget to make it illegal to receive more than $10,000 cash as payment – for anything! They already have strict rules for moving money from bank accounts overseas, and now it looks as though they are going to impose restrictions on cash payments within Australia. That’s got to be a good thing.
They are also going to expand the taxable payment reporting system. This was brought back into the building industry a couple of years ago and now it looks like they will extend it to additional industries. Again, this is a good thing as they’ll be tracking more payments and paperwork in more industries.
These changes have got to be a good thing. There are too many people out there who get away with too much and your genuine growing small business probably suffers from that.
The Wrap
That’s about it for small business. There’s not a huge amount there. The extension to the $20,000 immediate write off is a good one. They’re going to crack down on the cash economy, and will be looking a little more closely at R&D, so your paperwork really needs to be spot on.
Just a quick note about changes to Personal tax rates. The government is moving the 32.5% tax bracket from $87,000 to $90,000, not a big one, but beneficial for small businesses and employees with income in this range.
The final point is about superannuation. The government looks to be offering a choice to smaller super funds or younger members about whether they want insurance in their super funds. I’m not convinced that this sounds like a good idea because that little bit of hidden insurance for people who are young is quite valuable as they get older. They are also looking at banning exit fees often imposed when you try to move your super to one fund to another. Our Private Wealth Planners, will have more to say about this at Paris Financial.
There you have it folks. That is the small business tax changes in a nutshell from the Budget – the most exciting time of year for tax accountants. If you’ve got any queries, please call the office on 03 8393 1000 and speak to one of our Tax Champions.
Pat Mannix, Partner, Paris Financial
