Tax Changes for Small Businesses – 2019

It’s Tax Time again!

This edition of TaxWise outlines some tax changes for 2018-19 that should be considered by small businesses when preparing tax returns for 2018-19. There are also some tax tips and lodgement dates that businesses may find helpful when preparing returns. Focus areas that the ATO will be looking at have also been listed.

Tax changes for 2019

There have been some tax changes for small businesses for 2018-19 in relation to:

  • Expanding accelerated depreciation;
  • Increasing access to company losses;
  • Single Touch Payroll; and
  • International tax changes.

Expanding accelerated depreciation

 The Federal Budget raised the instant asset write-off threshold to $30,000 from Budget night and expanded the number of businesses who could access the write-off to businesses with turnover less than $50 million. The write-off will be accessible to eligible businesses until 30 June 2020.

The lifting of the threshold and extending the availability of the concession to many more businesses is most certainly a positive step. However, it does leave businesses in a situation where they will have to deal with three different thresholds in the 2019 income year if they want to actually claim the offset.

The thresholds will apply in the following way in the 2019 income year:

  • assets costing less than $20,000 from 1 July 2018 to 28 January 2019 (for businesses with turnover less than $10 million);
  • assets costing less than $25,000 from 29 January 2019 to 2 April 2019 (7.29pm) (for businesses with turnover less than $10 million); and
  • assets costing less than $30,000 from 2 April 2019 to 30 June 2019 (7.30pm) (for businesses with turnover less than $50 million).

It is important to note that the instant asset write-off threshold now includes businesses with a turnover from $10 million to less than $50 million.

Tip! Such a simple concession so favourable to small business is unnecessarily complicated for the 2019 income year. If you don’t get the timing or the amount right, you could miss out. You should ask your tax adviser to make sure you don’t miss out.

Increasing access to company losses: ‘Similar business test’

Most businesses will be familiar with the ‘same business test”. However, from 1 March 2019, there is also a more flexible test called the ‘similar business test’.

The purpose of these tests is to determine whether a company’s tax losses and net capital losses from previous income years can be used.

The new test should make it easier to access past year losses when companies enter into new transactions or business activities.

Under the similar business test, a company (and some trusts) can access losses following a change in ownership where its business is similar having regard to various factors, including the:

  • assets used by the business to generate assessable income;
  • activities and operations used to generate assessable income;
  • identity of the business; and
  • changes resulting from the development or commercialisation of assets, products, processes, services, or marketing or organisational methods.

Single Touch Payroll

Do you have employees? Are you ready for Single Touch Payroll?

If an employer reports through Single Touch Payroll, they are not required to provide a payment summary to their employees. Not all employers are reporting through this system yet. It only became compulsory for smaller employers from 1 July 2019.

Under this system, many individuals will no longer receive a Payment Summary (Group Certificate) from their employer due to the introduction of Single Touch Payroll. Individuals will find they have an ‘Income Statement’ through their myGov account.

Tip! Small businesses need to be ready for Single Touch Payroll.

 International tax changes

 Hybrid mismatch rules

 There have been changes to the hybrid mismatch rules. These rules are designed to prevent entities that are liable to income tax in Australia from avoiding income tax or obtaining global double tax benefits through hybrid mismatch arrangements that exploit differences in the tax treatment of an entity or instrument under the laws of two or more tax jurisdictions.

Thin capitalisation

There have also been changes to the thin capitalisation provisions. These rules prevent certain debt deductions (eg for interest expenses). The changes are designed to prevent double gearing structures. Double gearing structures use layers of ‘flow-through’ entities (such as trusts and partnerships) to issue debt against the same underlying asset.

Tip! These changes are complex. If they apply to your business, you should seek advice from your tax adviser.

Read our complete September 2019 Taxwise Business Newsletter here

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