The pundits are calling the 2017/2018 Federal Budget ‘centrist and populist’ following Treasurer Scott Morrison’s May 9 announcement speech. While issues such as housing affordability and reining in the big banks created a wall of chatter, changes affecting small business – beyond the recently announced Enterprise Tax Plan – were minimal.
So what do you need to know now?
1. Capital gains tax concessions
The tightening of capital gains tax (CGT) concessions for small business will deny eligibility for assets unrelated to the small business effective from 1 July, 2017.
The concessions currently in place assist SME owners by providing relief from CGT on assets related to their business, helping them to reinvest and grow as well as contribute to their retirement savings through the sale of the business. According to Budget Paper No 2, however, “some taxpayers are able to access these concessions for assets which are unrelated to their small business, for instance through arranging their affairs so that their ownership interests in larger businesses do not count toward the tests for determining eligibility for concessions.”
The small business CGT concessions will continue to be available to small business taxpayers with aggregated turnover of less than $2m or assets of less than $6m.
2. $20k asset write-offs
It’s welcome news that the $20,000 instant asset write-off will be extended to 30 June 2018, for businesses with an aggregated annual turnover of less than $10m.
Small businesses may immediately deduct purchases of eligible depreciating assets costing less than $20,000, provided they are first used, or installed ready for use, by 30 June, 2018. A few assets, such as horticultural plants and in-house software, are ineligible, so check carefully before you splash out.
Depreciating assets valued at $20,000 or more (which cannot be immediately deducted) may continue to be placed into the general small business pool and depreciated at 15% in the first income year, followed by 30% thereafter. The pool may also be immediately deducted if the balance is less than $20,000 over this period.
The current ‘lock-out’ laws from the simplified depreciation rules will continue to be suspended until June 30, 2018. These rules prevent small businesses from re-entering the simplified depreciation regime for five years if they opt out.
From July 1, 2018, the immediate deductibility threshold, and the balance at which the pool can be immediately deducted will revert to $1000.
Once again, according to Budget Paper No 2, “This measure is designed to improve cash flow for small businesses, providing a boost to small business activity and investment for another year. It is estimated to have a cost to revenue of $650m over the forward estimates period.
3. Prohibition of sales suppression technology
The government is acting to prohibit the manufacture, distribution, possession, use or sale of electronic point of sale sales suppression technology and software, which allows businesses to understate their income by deleting selected transactions and tax owing from this income is not reported to the Australia Tax Office.
The prohibition will take effect from the date of assent of enabling legislation.
4. Extension of funding to the Black Economy Taskforce
The government is providing additional funds of $32m to extend the ATO’s audit and compliance programs targeting black economy risks.
The Taskforce’s programs focus on businesses that have disengaged from the tax system and are directed at changing the black economy and related behaviors such as non-lodgement, the omission of income and non-payment of employer obligations.
Changes to superannuation and employment of overseas workers may also affect your business.