2017 Federal Budget Impact on Business:  This year’s Federal Budget has some sweeteners for business, confirming tax cuts announced earlier this year for businesses, an extension of the instant asset write-off, new training budgets as a result of foreign visa changes, and a reduction to red tape.

Small business CGT breaks to be tightened

Small business CGT concessions will be tightened from 1 July 2017 to deny eligibility for assets which are not related to the small business.

The concessions assist small business owners with concessions on capital gains tax on assets which help their business reinvest and grow.  However, some taxpayers are able to access these concessions for assets which are not directly related to their small business, by structuring their ownership to ensure the asset does not count towards the eligibility tests.

The small business CGT concessions will  be available to small business taxpayers with  turnover of less than $2m or business assets of less than $6m.

Instant asset write-off extended for 12 months

The $20,000 instant asset write-off for small business is to be extended by 12 months to 30 June 2018, for businesses with an aggregated annual turnover of less than $10million.

Small businesses will be able to immediately deduct purchases of eligible depreciating assets costing less than $20,000 provided they are first used, or installed by 30 June 2018. Not all assets are eligible however, so check with your accountant before considering hefty investments.

Depreciating assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed into the general small business pool and depreciated at 15% in the first income year, and 30% for each income year thereafter. The pool can also be immediately deducted if the balance is less than $20,000 over this period.

The current lockout from the simplified depreciation rules will continue to be suspended until 30 June 2018. These rules prevent small businesses from re-entering the simplified depreciation regime for five years if they opt out.

From 1 July 2018, the immediate deductibility threshold, and the balance at which the pool can be immediately deducted will revert back to $1,000.

This measure is designed to improve cash flow for small businesses, providing a boost to small business activity and investment.

Business tax cuts

The Ten Year Enterprise Tax Plan, unveiled in last year’s federal budget, remains the same.

Incorporated small businesses with turnover up to $10 million will have their rate of tax cut to 27.5 percent for the current financial year.

Meanwhile, those businesses with turnover above that threshold, up to $50 million, will receive the same tax rate from the 2018-19 financial year.

Unincorporated businesses with annual turnover of up to $5 million will receive an increase in the unincorporated tax discount, taking the rate to 8 per cent.

Red tape cuts

The government announced measures to encourage state governments to cut their red tape causing significant disruption to SMEs.

Incentives up to $300 million over two years are available for States which cut unnecessary restrictions on these businesses, including regulatory frameworks that impede marketplace competition.

Skilled labour

Following the unexpected abolition of 457 temporary worker visas last month, announcements were made regarding an increase in funding for training purposes.

Under the current arrangement, which sees employers contribute 1 to 2 per cent of their payroll to training when employing foreign workers, would cease and in its place a new annual foreign worker levy, with the funds raised to go into a new Commonwealth-State Skilling Australians Fund.

The annual foreign worker levy of $1,200 or $1,800 per worker per year on temporary work visas and a $3,000 or $5,000 one-off levy for those on a permanent skilled visa would be contributed towards the fund, which should contribute $1.5 billion to state and territory governments over four years, with a focus on apprenticeships and traineeships in high-demand occupations that currently rely on skilled migration, as well as focussing on regional areas and future growth industries.

Tax Avoidance by Business

The government is toughening the multinational anti-avoidance law by extending it to corporate structures involving foreign partnerships and trusts.   The taxable payments reporting system is being extended to contractors in the courier and cleaning industries, and banning technology which allows businesses to falsify sales records.  A range of tax integrity measures will be introduced to uncover tax fraud, GST avoidance and CGT tax concessions for small business.