Welcome to our yearly summary of how the Federal Budget impacts small businesses, SMSF's and you the taxpayer. This years budget is much earlier than usual and of course could be a moot point depending on what happens with the election. Remember all of these things need to be passed before they are actually law.
For Small Business
Similar to the last few years there really isn't a lot of changes for small business.
Instant Asset Write Off
The Instant asset write off is being extended for another 12 months AND the threshold expanded. This applies to any asset you purchase for your business (ie toolbox, computers, cars etc). You can claim a tax deduction in full, rather than only being able to claim a % each year if the asset costs :
Less than $20,000 if purchased from 01/07/2018 to 28/01/2019
Less than $25,000 if purchased from 29/01/2019 to 02/04/2019 7.30pm
Less than $30,000 if purchased from 02/04/2019 7.30pm to 30/06/2020
The new $30k threshold applies to anyone with turnover up to $50million (threshold previously was $10million)
Small Business can continue to place assets above these thresholds into a small business pool and claim 15% of the cost as a tax deduction in the 1st year and 30% each year thereafter. The pool can be written off in full once under the threshold.
Let’s note here this is a tax deduction and not a hand out from the government. You still need to be able to fund this.
Tax Cuts
Company Tax Rates are set to be reduced earlier than expected for those businesses with a turnover of less than $50million
2019 + 2020 Financial Years you will pay 27.5% tax
2021 Financial Year you will pay 26% tax
2022 Financial Year you will pay 25% tax
All other Companies will continue to pay 30%
Education (Apprenticeship Payments)
The Government is helping up to 80,000 additional apprentices over the next five years
by expanding apprenticeship incentives in occupations facing shortages of skilled
workers.
Employers will get $1,500 at the commencement of an apprenticeship, then $2,000 at the end of 12 months, then $4,500 at the completion of an apprenticeship.
Apprentices will get $1,000 at the end of 12 months then $1,000 at completion.
Note it's not for ALL apprenticeships at the moment. The list will be reviewed each year. Targets at the moment are :
- Carpenters
- Plumbers
- Hairdressers
- Air-conditioning mechanics
- Bricklayers
- Plasterers
- Bakers
- Vehicle Painters
- Wall and floor tilers
- Arborists
EMDG
There is a $60 million increase in funding over the next 3 years to the Export Market Development Grant. The EMDG is to assist exporters (spending on advertising, international travel, conferences, sales trips etc) to promote products to overseas markets.
You can get up to a 50% rebate on these expenses. The grant cap is $150k with $40k being paid when the grant is assessed and the remainder payable at the end of the financial year. The big catch here is that the remainder over the $40k is only paid if there is enough money in the pool. With more and more businesses claiming this grant the pool isn’t big enough to fund all claims so most people only get 30% of the maximum.
On a startup note there have been no changes to R&D or anything specific announced for Startups.
Tax Avoidance Taskforce
The ATO are getting a stack of cash to target ‘dodgy' people.
Multinationals, large public and private groups, trusts and high net wealth individuals are on the target list for trying to get away with not paying tax and super.
For small businesses the Fair Work Ombudsman has $9.2 million over 4 years to take a look at Sham Contracting. This will be focused on people who are really employees and not contractors to ensure businesses are paying workers comp, super and entitlements for these employees.
On this note government agencies will also be getting a lot more information from the ATO to help with data matching. Now that all businesses need to report to the ATO each payrun (Single Touch Payroll) overpayments of welfare will be reduced with real time data.
Expect a lot of movement on data matching with the ATO having more funds than ever to combat people not paying tax and super. Example is the sharing economy reporting system that has been circulated as a consultation paper.
Strengthening the ABN System
From 1 July 2021 anyone with an ABN will be required to lodge a tax return in order to keep that ABN active. Now this has no bearing on those who lodge returns on time, but is aimed at people who are operating businesses, but failing to lodge returns or operating in the cash economy.
There is one additional reporting requirement from 1 July 2022 to confirm annually the accuracy of the details on the Australian Business Register at the time of lodging your tax return. We expect this will simply be an additional field to complete in your tax return.
Other Tax Notes
For Primary Producers and Tourism Operators the Luxury Car Tax refund will increase from $3k to $10k. This is to start from 1 July 2019
For those impacted by the Queensland Floods and storms grants will be tax exempt.
What else will help / impact small businesses
$2 billion in funding available to help non-banks and smaller banks promote lower cost loans for small and family businesses. It will be interesting to see what plays out in this market over the next 12 months with access to funding a huge issue for small businesses wanting to grow. Hopefully this will eliminate the issues with getting traditional bank funding!
Large businesses over $100 million turnover will need to publish payment information on how long they take to pay small businesses. Any of these businesses who wish to tender for government contracts will need to pay small businesses in 20 days (this is what the government are aiming for from 1 July 2019). Boom! No more waiting 90 days to be paid.
For Individuals
Other than some tax cuts nothing to report for Individuals!
Tax Refunds / Rate Changes
The 1st announcement from the government was about an increase to tax offsets. This isn’t less tax each week in your pay packet, but an offset you will get at the end of the year when you lodge your tax return.
If you earn:
less than $37k you will get up to $255 back in your tax return
between $37k-$48k you will get between $255-$1080 back ($255 + 7.5 cents per dollar of income over $37,000)
between $48k-$90k you get the full $1080 back
between $90k-$126k you get between $1080 to nil (ie the closer you get to $126 the lower amount you get back)
The 2nd announcement is about a change to the actual tax rates, ie more in your pay packet each week.
For those who want to see the impact of the tax rate changes over the next 7 years checkout this handy little calculator
#funfact
If you earn $60k a year you get $1,080 back for the next 6 years then that increases to $1,455
If you earn $100k a year you get $915 for the next 4 years, then $1,665 for 2 years then $3,040 after 6 years
If you earn $200k a year you get $135 for the next 4 years, then $2,565 for 2 years then $11,640 after 6 years.
The aim is to really reduce the overall tax rates to bring AU back in line with the rest of the world.
Energy Assistance Payment
The Government will provide $284 million for a one‑off, income tax exempt payment of $75 for singles and $125 for couples to more than 3.9 million eligible social security payment recipients, assisting with their next power bill and cost of living expenses. This payment will be made to recipients of the Age Pension, Disability Support Pension, Carer Payment,Parenting Payment Single, Veterans’ Service Payment, Veterans’ Income SupportSupplement, Veterans’ Disability Payments, War Widow(er)s Pension or Permanent
Impairment Payments who are residing in Australia as at 2 April 2019.
This is a tax-free payment and is set to be automatically paid before 30 June, pending passing legislation.
For Super
Not a lot of changes to super either. Note, no changes to Franking Credit refunds in this budget, but that is likely to change with a Labor Government.
Older Australians Super Top-Up
At the moment you can only contribute to super if you are over 65 if you work 40 hours in a 30 day period - ie you meet the ‘work test’. From 1 July 2020 this age will be extended to 67 which brings it back in line with the Age Pension. 2 more years of contributing to super!
Bring Forward Contributions
Also extended to 67 is the bring forward arrangements for $100,000 in non-concessional contributions. These concessions allow you to bring forward 3 years of non-concessional contributions into 1 year, which means you could contribute $300k in one year. This doesn’t start until 1 July 2020 and note you must have less than $1.6million in your fund in order to qualify.
Spouse Contribution Tax Offset
If you are 70-74 and meet the work test from 1 July 2020 you can claim the spouse contribution tax offset of $540. The current age limit for this is 70. This offset is for contributions you make to your Spouse’s Superannuation Fund.
To qualify your spouse income has to be less than $40,000. The effective date is also 1 July 2020 for this to start.
A bit of fun
For those of you who like to bob (or sing) along to a playlist at work or in the car, we had some fun putting together a Budget playlist all about 'money'. From the Classics of Pink Flloyd & Abba to rappers Lil Dicky & Snoop Dogg this playlist has something for everyone! Who knew so many people made songs about money!
What next
We will keep a close eye on what happens election wise over the next few months as this will really determine what, if any of these proposals will be passed. Stay tuned to our Facebook page or Ninja News for updates.
