Here are some of the measures that have come out of the Budget and how they impact small businesses.
Immediate tax write-off for new purchases costing under $30,000
- From Budget night until June 2020, there will be an immediate write-off for each asset purchased costing up to $29,999.99 for business with turnover up to $50m. This extends measures introduced last year. Previously, instant write-offs were limited to asset purchases costing below $19,999.99 (increased to $24,999.99 in January 2019) and for those with turnover under $10m.
- Small businesses with turnovers of less than $10m can continue to use tax depreciation pooling for assets costing over $30,000 and depreciate at 15% in the first year and 30% thereafter. If the pool balance falls below $29,999.99, they can be written off immediately.
- Medium businesses with turnovers of between $10m to $50m are required to follow the annual depreciation rules with no immediate write-off for balance below $29,999.99.
- The instant write-off thresholds are;
- $19,999.99 from 1 July 2018 to 28 January 2019 (businesses with turnovers of less than $10m)
- $24,999.99 from 28 January 2019 to 2 April 2019 (for businesses with turnovers of less than $10m)
- $29,999.99 from 2 April 2019 to 30 June 2020 (for businesses with turnovers of less than $50m)
- If claiming GST, the instant write-off cost excludes GST. If not claiming GST, the instant write-off cost includes GST.
- You can have more than one write-off depending on the number of assets purchased.
- Assets can be new or second-hand.
- The instant asset write-off can be claimed in the year of first use or if installed and ready to use.
Always discuss with your tax adviser when considering purchasing assets or businesses. The way assets are described, documented, and the timing of purchase are important and may impact the claiming of the instant write-off.
Small business tax rates going forward
- 2020-21: For unincorporated businesses, the small tax discount rate will be 13% and 16% for the years after that. The discount rate until then will continue to be 8%.
- 2021-22: For companies with turnover below $50m, a tax rate of 25% will apply. The tax rate until then will be 27.5%.
Other announcements that will help small and medium businesses
Making it easier, quicker and cheaper to resolve tax disputes
- A new tax division dedicated to small business
- The ATO will pay reasonable costs when their decisions are questioned
Improving access to advice
- 10 tax clinics across the country, to provide free advice on tax
Improved access to finance
- A new $2bn Australian Business Securitisation Fund to enhance access to finance
Making invoicing easier
- A new e-invoicing system that will help to save on cost of doing transactions and increase global trade
Cutting red tape
- Streaming the GST return by reducing questions
Improving digital capacity
- Appointing a non-Government agency to enhance capacity
Apprentices – Skills package
- Increase in cash incentives to encourage the creation of 80,000 new apprenticeships in the following trades – carpenters and joiners; plumbers; hairdressers; air-conditioning and refrigeration mechanics; bricklayers and stonemasons; plasterers; bakers and pastry cooks; vehicle painters; wall and floor tilers and arborists.
- Employers will receive cash incentive payments of $8,000 per placement – double the existing rate. Employers will be eligible for $3,500 after 12 months and $4,500 at completion of the apprenticeship.
- The new apprentices will receive a $2,000 cash payment ($1,000 after 12 months and $1,000 on completion).
Beware tax crackdown on tax dodging and welfare cheating
- An additional $1bn over 4 years has been given to the ATO to boost their continuous review of those who are not paying their fair share of tax. The ATO has stated that they will increase their focus and investigations on accountants; lawyers; bankers; wealthy families and international companies. $3.6bn is expected to be recovered from this work.
Expect the tax returns of landlords to be closely reviewed and investigated. The ATO has said that nine out of 10 tax returns reviewed recently had property related errors. In total, $47.4bn had been claimed as expenses and $44.1bn returned as rental income. Further, the ATO said that in 2016-17, 1.3m taxpayers made combined losses of $12bn from renting houses and units – 60% of rental properties returns showed losses and only 40% profit.
Read our complete April 2019 Taxwise Budget Newsletter here