This year’s budget has been framed against a backdrop of a strengthening national economy. Highlights include personal income tax cuts, improved digital technology, the extension of the instant write-off provision, and tougher rules for illegal phoenixing activities which includes increased liabilities for directors. See what applies to you and how to take advantage of it.
Low and middle income earners will experience immediate relief in the form of non-refundable tax offset of up to $530 per year (around $10 per week for lower income earners) in the first step of income tax cuts. The offset will be available for four years between 2018-19 and 2021-22, and will be awarded to you after your annual tax return has been lodged.
The second step addresses bracket creep by increasing the threshold of the 32.5 per cent tax bracket from $87,000 to $90,000 from 1 July 2018. The low income tax offset from step one will then be increased from July 2022, and the 19 per cent income tax bracket increased to $41,000. From July 2022, the 32.5 per cent income tax bracket will be increased from $90,000 to $120,000.
As part of the third step the 37 per cent income tax bracket will be removed in a bid to simply the tax system.
At the end of the seven-year plan, Australians earning more than $41,000 annually will be left with just two income tax brackets: 32.5 per cent for incomes between $41,001 and $200,000, and 45 per cent for incomes exceeding $200,000.
$20,000 instant asset write-off tax extended to 30 June 2019
The popular instant asset write-off for small businesses with a turnover of less than $10 million has been extended until 30 June 2019. The scheme allows small businesses to claim immediate deductions for new or second-hand plant and equipment asset purchases such as vehicles, tools and office equipment costing up to $20,000.
Before making a large purchase, you should speak to your accountant and assess how the asset will benefit your business. For more information on the provision, visit the Australian Taxation Office (ATO).
Black market economy
From 1 July 2019, businesses will only be allowed to accept cash payments of up to $10,000 for their goods and services. Payments over $10,000 will need to be made electronically or by cheque.
Businesses bidding for government contracts over $4 million will, from 1 July 2019, need a statement of a satisfactory tax record from the ATO.
Illegal phoenixing activity
Measures have been implemented to counter illegal phoenixing (ie. where a new company has been created to continue the business of a company that has been liquidated to avoid paying debts). Some of the measures include:
- Introducing new phoenixing offences to target operators who engage in the practice.
- Preventing directors from inappropriately backdating resignations to escape liability or prosecution.
- Limiting the director’s ability to resign if it leaves the company with no directors.
- Restricting the ability of related creditors to vote on appointing, removing or replacing external administrators.
- Extending the Director Penalty Regime to make directors personally liable for GST, luxury car tax and wine equalisation tax.
The Federal Government also plans to give the ATO expanded powers to retain refunds in situations where there are outstanding tax lodgements.
From 1 July 2019, GST will be extended to Australian hotel bookings made through offshore websites. If agreed by all states and territories, this will mean offshore online booking providers will need to calculate their GST turnover the same way as local businesses.
Streamlining transactions with Government
$92.4 million will be allocated to the Digital Transformation Agency to create the GovPass Program. The Federal Government program will provide businesses with easier access to digital services such as creating a digital identity and completing a Tax File Number application online.
Education and employment
Levies from the Skilling Australians Fund will be prioritised for apprenticeships and traineeships in high demand areas. Mature age workers will also be supported through the provision of $189.7 million over the next five years to enable them to work longer, become self-employed and boost their retirement incomes.
Business Activity Statements
Changes to Business Activity Statements (BAS) will see the number of compulsory questions reduced from 20 to three. The streamlining of GST reporting is expected to save small businesses an average of $590 each per year.
Small business entity turnover threshold
Small businesses will be given greater access to a range of tax concessions with the small business entity turnover threshold being extended from $2 million to $10 million.
Payroll and superannuation fund reporting
Small businesses struggling with the transition to Single Touch Payroll (STP) will benefit from funding awarded to the ATO through to 1 July 2019. The ATO will provide support over a three year period to small businesses to transition to STP reporting with support teams and contacting small business employers by phone and field visits.
$20 million has been allocated to establish a small-to-medium enterprise export hubs program, and additional funding for export growth centres. These programs should help many small businesses grow their business internationally and participate in global supply chains.
No compliance no deduction
In combating sham contracting arrangements such as treating an employment relationship as an independent contract to avoid employer responsibilities, as of 1 July 2019, businesses will no longer to be able to claim a tax deduction for:
- payments of wages to employees
- payments made to contractors where the contractors have not provided an ABN.
Research and development tax incentive
The Research and Development tax offset has been aligned to company tax rates and has been capped at $4 million for businesses with an annual turnover of less than $20 million. This is expected to negatively impact small businesses that rely on the tax concession to compete with larger businesses.
Wondering what the state budget means for your small business? Read the blog article.
If you have any questions about tax planning or business finance, speak to your accountant or contact our free small business advisory service.