There are significant changes that affect small businesses and their owners announced in this budget, not necessarily directly through tax outcomes but in some cases through increased personal liability exposure or further red tape etc, and many aren’t discussed in the media (the media is still caught up on the $10 per week), I’ve summarised the key announcements for small business. A lot of this is principles only and will need clarification when the law is released and passes through parliament. Attached is a newsletter on the budget measures with more details.
Asset Write off Extended – The ability for small business entities to claim an immediate deduction for assets costing less than $20,000 (ex GST in total including delivery/install/stamp etc) has been extended until 30 June 2019.
From 1 Jul 2019 – Risk to tax deductions for non-compliance by employers – Employers who do not keep up with their PAYG obligations will not be able to claim a tax deduction for payments to employees (such as wages). Businesses will also lose the ability to claim deductions for payments made to contractors where the contractor does not provide an ABN and the business does not withhold PAYG.
From 1 Jul 2019 – $10k Limit On Cash Transactions – A limit of $10,000 will be introduced for cash payments made to businesses for goods and services from 1 July 2019. Payments above the threshold will need to be made through an electronic payment system or by cheque. (i.e. to make it illegal to pay with cash for things over $10K, which is interesting given cash itself is legitimate currency – and we could perhaps see this threshold reduced over time);
Changes to the R&D tax offset – tightening of the regime from 1 Jul 18 on what qualifies and how its calculated plus a cap on the offset available;
Personal Liability scope of Directors Increased to target Phoenixing – the current Director Penalty Regime includes unpaid superannuation guarantee and PAYG withholding amounts but does not include GST liabilities. These proposed changes will ensure that directors become personally liable in situations where the company has not satisfied its GST obligations as well as luxury car tax and wine equalisation tax liabilities.
New personal tax rates for 30 June 2019 year (and changes after that noted in the table below and in the attachment):
A new low and middle income tax offset up to $530 dollars, payable on lodgement of the individual tax return for 30 Jun 2019 (which is generally lodged by 15 May 2020);
The 32.5% tax bracket tops out at $90,000 instead of $87,000;
Low and middle income tax offset – Applied as a non-refundable tax offset after an individual lodges their income tax return, the tax offset provides:
Taxable Payments Annual Report scope extended – From 1 July 2019 the following industries will be required to lodge annual taxable payments reports to the ATO for their contractors:
security providers and investigation services;
road freight transport; and
computer system design and related services.
Superfund changes – among a number of minor measures announced (refer to the attachment for more info) – an SMSF from 1 Jul 19 can have 6 members (up from 4)
Unpaid present entitlements will come directly within the scope of Division 7A. (distributions to corporate beneficiaries) – legislation TBC.
A Small and Medium Enterprises Export Hubs program will be established. The program seeks to enable co-operation and boost the export capability of local and regional businesses, through support to develop collective brands, leveraging local infrastructure to scale business operations, and positioning regional businesses to participate in global supply chains.
More Funding For The ATO And Tax Practitioners Board – Scattered throughout the Budget are a series of funding initiatives directed to the ATO:
Debt – $133 million provided to increase debt collection and the improve the timeliness of those payments.
Black economy – $318.5 million over four years to implement strategies to target the black economy including a ‘black economy hotline’ where you can ‘dob in’ a tax evader! The funding replaces the existing black economy programs.
Individual compliance – $130.8 million to increase compliance activities targeting individual taxpayers and their tax agents. For example, the ATO will be able to continue focussing on foreign income derived by high wealth individuals. The ATO has also made it pretty clear that it will be looking closely at deductions claimed for work-related expenses.
Personal contributions to super – $3.1 million to improve the integrity of the ‘notice of intent’ (NOI) processes for claiming personal superannuation contribution tax deductions.
The Tax Practitioners Board will also receive $20.1 million over four years to assist the TPB in meeting its responsibilities to ensure that tax agents comply with both professional and ethical standards. The measure will be funded by an increase in tax practitioner registration fees.