2018/19 Federal Budget Announcement
Further extension of the small business $20,000 instant asset write-off to 30 June 2019
Whilst this is welcome news, it is important to note that the instant asset write-off concession only applies to businesses with an aggregated annual turnover of less than $10 million.
Research & development tax incentive overhaul
A range of new measures will apply from 1 July 2018 which are targeted at improving the integrity, effectiveness and affordability of the R&D tax incentive program. These measures include significant changes to the calculation of the R&D tax incentive, an extension to the R&D expenditure threshold and capping of cash refunds for some entities.
Payments to employees and contractors will be no longer be deductible where PAYG tax obligations have not been met from 1 July 2019
This measure applies to payments to employees (i.e. salaries & wages) where no amount of PAYG tax has been withheld, despite PAYG withholding requirements applying. Deductions will also be denied for payments made by businesses to contractors where the contractor does not supply an Australian Business Number and the business does not withhold any amount of PAYG.
Extension of the Director Penalty Regime
The Director Penalty Regime currently only applies to unpaid PAYG Withholding and superannuation guarantee charge obligations and can result in company directors becoming personally liable for company debts.
The Regime will be extended to include GST, luxury car tax and wine equalisation tax as part of the budget measures countering illegal phoenix activities.
Further changes to Division 7A from 1 July 2019 (applicable to private companies)
The operation of Division 7A of the Income Tax Assessment Act 1936 will be clarified to ensure that unpaid present entitlements (UPEs) of private company beneficiaries come within the scope of Division 7A. A UPE is a distribution from a trust that has not been paid out.
The commencement date of other amendments to Division 7A that were announced within the 2016/17 budget will also be deferred until 1 July 2019.
Introduction of a $10,000 cap on cash payments that businesses can accept for goods and services from 1 July 2019
This measure is aimed at reducing tax evasion (cash economy) and money laundering and will require transactions over the $10,000 cap to be made through an electronic payment system or by cheque. However this measure will not apply to financial institutions or consumer to consumer non-business transactions.
Expanded taxable payments reporting regime
Taxable payments reporting obligations will be extended to the following industries from the 2020 financial year:
- Security providers and investigation services;
- Road freight transport; and
- Computer system design and related services.
Taxable payments reporting currently only applies to the building & construction industry however it is also proposed to apply to the cleaning and courier industries from 1 July 2018.
Introduction of integrity measures for Commonwealth procurement process from 1 July 2019
Businesses seeking to tender for Australian Government procurement contracts in excess of $4 million will be required to provide a statement from the Australian Taxation Office confirming compliance with their taxation obligations.
Whilst considering and planning for the potential impact of the above measures is prudent, business owners should also keep in mind the measures that were announced within previous federal budgets that have already been, or are expected to be, legislated. These measures include corporate tax rate reductions, tightening access to the small business CGT concessions, extensive superannuation reforms and changes to the collection of GST on the sale of new residential property, just to name a few.
Also, it’s important for business owners to keep in mind that implementation of above measures announced within the 2018/19 budget are not guaranteed, especially in light of the upcoming federal election and the deferred commencement date of many of the measures. Further, any change in government next year is highly likely to result in a raft of further tax reforms, both for individuals and businesses, based on recent announcements from Bill Shorten and other members of the Australian Labour Party.
I expect that tax reform will again be a key election issue within the next 12 months and early identification and understanding of the potential impacts of these reforms will be vital for business owners.
Get in touch with our team to discuss the potential impact of the new measures announced within the recent 2018/19 Federal Budget on you and your business. Contact BLG Business Advisers on (02) 4229 2211 or online to arrange an appointment today.