It’s that time of year again – tax return time!
Before you complete your tax return for 2018, here are some key dates, changes and information that you should be aware of in case they affect you.
What’s new for small business?
Several new tax time-related changes have happened since last year that may affect you. Here are a few of them to be aware of.
Lower company tax rate changes
From 1 July 2017, companies that are base rate entities will apply the 27.5% corporate tax rate.
A company is a base rate entity for 2017-18 if it has an aggregated turnover of less than $25 million and is carrying on a business for all or part of the income year.
The company tax rate will remain at 30% for other companies that are not base rate entities.
The lower 27.5% company tax rate will progressively apply to base rate entities with a turnover less than $50 million by the 2018-19 income year. From 2024-25, the lower company tax rate will reduce each year until it is 25% by 2026-27.
- A company may be a base rate entity to access the lower company tax rate and also be a small business entity to access the small business concessions.
- The maximum franking credit that can be allocated to a frankable distribution has also been reduced to 27.5% for these companies, in line with the company tax rate.
$20,000 instant asset write-off threshold extended
The $20,000 instant asset write-off threshold has been extended until 30 June 2018. This means that if you bought an asset before 30 June and it cost less than $20,000, you can write off the business portion in your 2018 tax return.
If you are a small business, you can immediately deduct the business portion of most assets that cost less than $20,000 each if they were purchased:
- from 1 July 2016 to 30 June 2018, and your turnover is less than $10 million and the asset was first used or installed ready for use in the income year you are claiming it in;
- from 7.30pm on 12 May 2015 to 30 June 2016, and your turnover is less than $2 million.
This deduction is used for each asset that costs less than $20,000, whether new or second-hand.
- Assets that cost $20,000 or more can’t be immediately deducted. They will continue to be deducted over time using the general small business pool.
- You write off the balance of this pool if the balance (before applying any other depreciation deduction) is less than $20,000 at the end of an income year.
In the latest Federal Budget, there was a proposal to extend the $20,000 instant asset write-off threshold to 30 June 2019. This change is not law yet.
Expanded access to small business concessions
More businesses are now eligible for most small business tax concessions.
A range of small business tax concessions became available to all businesses with turnover less than $10 million (the turnover threshold) from 1 July 2016. The previous turnover threshold was $2 million.
The $10 million turnover threshold applies to most concessions, except for:
- the small business income tax offset, which has a $5 million turnover threshold from 1 July 2016
- capital gains tax (CGT) concessions, which continue to have a $2 million turnover threshold.
The turnover threshold for fringe benefits tax (FBT) concessions increased to $10 million from 1 April 2017.
Single touch payroll
Single touch payroll (STP) is a reporting change for employers. It started on 1 July 2018 for employers with 20 or more employees.
You will report payments such as salaries and wages, pay as you go (PAYG) withholding and superannuation information from your payroll solution each time you pay your employees.
You can do this through your existing payroll software (such as accounting software) as long as it is updated to offer STP reporting. Payroll software providers are updating their products now. Talk to your provider to find out how and when your product will be ready
- If you have 20 or more employees you will need to report through STP from 1 July 2018. The first year will be a transition period and penalties may not apply.
- If you have 19 or less employees, you will need to report through STP from 1 July 2019, subject to legislation being passed in parliament.
Sale of low value goods
If your small business is registered for GST and imports low value goods for business use in Australia, you may not need to pay GST. You simply need to tell your overseas supplier that you are registered for GST, and provide them with your ABN.
If you are not registered for GST, GST can apply to these purchases.
Read our complete September 2018 Taxwise Business Newsletter here