FEDERAL BUDGET 2017: Business
$20,000 instant asset write-off
The $20,000 instant asset write-off will be extended for another 12 months until 30 June 2018. This was due to revert to $1,000 on 1 July 2017.
Under this measure, small businesses (with aggregated turnovers of less than $10 million) will be able to immediately deduct purchases of eligible assets costing less than $20,000 first used or installed ready for use by 30 June 2018.
The business community has been asking for the $20,000 write-off to remain permanently. Although the extension of one year is less than what most business owners would prefer, it is nevertheless a good step. The annual aggregated turnover threshold to access this concession has also been increased from $2 million to $10 million from 2016-17. The threshold increase along
with this Budget announcement means that many more businesses will be able to access this concession than in previous years.
Assets costing $20,000 or more can continue to be placed into the simplified depreciation pool and depreciated at 15% for the first income year and 30% for each income year afterwards. The pool balance can also be immediately deducted if it reduces to less than $20,000 during this period.
Small business CGT concessions
The government will amend the small business CGT concessions to ensure that the concessions can only be accessed in relation to assets used by a small business or ownership interests in a small business.
The concessions assist owners of small businesses by providing relief from CGT on assets related to their business that help them to re-invest and grow, as well as contribute to their retirement savings through the sale of the business.
The measure, with application from 2017-18, will affect taxpayers:
- that are small businesses with annual aggregated turnover of less than $2 million, or
- whose asset was used in a connected small business, or
- who have a maximum net asset value not exceeding $6 million.
However without legislative detail being available, it is a little unclear as to whether the measure will result in:
- the concessions becoming unavailable in relation to passively held assets, or
- the concessions only being available in relation to passively held assets if both parties are small businesses.
In either case, it would appear that this measure will have the effect of restricting the availability of the small business CGT concessions. This is disappointing, especially with the turnover threshold remaining at $2 million while the threshold for all other small business concessions increased to $10 million or $5 million from 2016-17.
Reintroducing the 10-year enterprise tax plan
In the 2016-17 budget, the government proposed a 10-year enterprise tax plan that included progressive tax cuts over 10 years for all companies until the corporate tax rate is 25% in 2026-17.
In late March 2017, Parliament passed legislation to give effect to these tax cuts – but only for companies that carry on a business and have an aggregated annual turnover of less than $50 million.
The government has now announced its intention to reintroduce the rest of the original package. The following is the original enterprise tax plan for all companies.
From 2016-17 to 2022-23
The initial 27.5% rate will be implemented progressively from 2016-17 to 2022-23 based on the company’s annual aggregated turnover:
[table “24” not found /]From 2023-24 to 2026-27
Once all companies are at a rate of 27.5%, the rate will be progressively be reduced to 25% in 2026-27:
| Comfortable lifestyle | Modest lifestyle | Age pension | |
|---|---|---|---|
| Single | $42,953 a year | $27,425 a year | $21,222 a year |
| Couple | $60,604 a year | $39,442 a year | $31,995 a year |
| Maintenance | Replace kitchen and bathroom over 20 years | No budget for home improvements. Can do repairs but can’t replace kitchen or bathroom | No budget to fix home problems like a leaky roof |
| Appliances | Better quality and larger number of household items and appliances and higher cost hairdressing | Limited number of household items and appliances and budget haircuts | Less frequent hair cuts or getting a friend to cut your hair |
| Air Conditioning | Can run air conditioning | Need to watch utility costs | Less heating in winter |
| Eat Out | Restaurant dining, good range & quality of food | Take out and occasional cheap restaurants | Only club special meals or inexpensive takeaway |
| Internet | Fast internet connection, big data allowance and large talk and text allowance | Limited talk and text, modest internet data allowance | Very basic phone and internet package |
| Clothing | Good clothes | Reasonable clothes | Basic clothes |
| Travel | Domestic and occasional overseas holidays | One holiday in Australia or a few short breaks | Even shorter breaks or day trips in your own city |
| Health | Top level private health insurance | Basic private health insurance, limited gap payments | No private health insurance |
| Vehicle | Owning a reasonable car | Owning a cheaper more basic car | No car or if you have a car it will be a struggle to afford repairs |
| Leisure | Take part in a range of regular leisure activities | One leisure activity infrequently, some trips to the cinema or the like | Only taking part in no cost or very low cost leisure activities. Rare trips to the cinema |
The government will try again to pass the corporate tax cuts for companies of all sizes. Given the reluctance by the current Senate and its amendments to the original package before it was passed for companies of less than $50 million aggregated turnover, it would be unlikely that the tax cuts for larger companies will be passed anytime soon – unless the Government can offer a sweetener to dissenting Senators.
Please contact TNR with any queries on the above information.