Increase to Instant Asset Write off & Now Available to More Businesses

First, the write-off has been extended to medium sized businesses, where it previously only applied to small business entities. The explanation of small and medium business entities are below. The second important change is that the instant asset write-off threshold is to increase from $25,000 to $30,000.

The threshold applies on a per asset basis, so eligible businesses can instantly write off multiple assets. The threshold increase will apply from 2 April 2019 to 30 June 2020. Prior to 2 April, a bill was introduced on 13 February to increase the current instant write off from $20,000 to $25,000 and extend this until 30 June 2020. This bill has not yet passed.

Small businesses

Small business entities (annual turnover of less than $10 million) will be able to immediately deduct purchases of eligible assets costing less than $30,000 that are first used, or installed ready for use, from Budget night (ie 2 April 2019) to 30 June 2020. Small businesses can continue to place assets which cannot be immediately deducted into the small business simplified depreciation pool and depreciate those assets at 15% in the first income year and 30% each income year thereafter.

The pool balance can also be immediately deducted if it is less than the applicable instant asset write-off threshold at the end of the income year (including existing pools). The current "lock out" laws for the simplified depreciation rules (ie these prevent small businesses from re-entering the simplified depreciation regime for 5 years if they opt out) will continue to be suspended until 30 June 2020.

Medium sized businesses

Medium sized businesses (annual turnover between $10 million and $50 million) will also be able to immediately deduct purchases of eligible assets costing less than $30,000 that are first used, or installed ready for use, from Budget night 2 April to 30 June 2020. The immediate asset write off was not previously available to medium sized businesses.

The above threshold will revert back to $1000 on 1 July 2020 (subject to further changes) and from that time, will only be available to small business entities.

Proposed Div 7A amendments – Start date deferred 12 months

Division 7A rules cover situations whereby taxpayers withdraw funds from their company or trusts without paying tax as you would via wages or dividends. To avoid costly tax implications, loan agreements are normally entered into to pay the monies back over a 7 or 25 year period.

The proposed amendments draw on recommendations from the Board of Taxation and include:

  • simplified Division 7A loan rules to make it easier for taxpayers to comply;
  • a self-correction mechanism to assist taxpayers to promptly rectify breaches of Division 7A by giving them the opportunity to voluntarily correct their arrangements without penalty;
  • safe harbour rules for the use of assets to provide certainty and simplify compliance for taxpayers;
  • technical amendments to improve the integrity and operation of Division 7A while providing increased certainty for taxpayers; and
  • clarification that unpaid present entitlements (UPEs) come within the scope of Division 7A;
  • amended rules, with appropriate transitional arrangements, regarding complying Div 7A
  • loans, including having a single compliant loan duration of 10 years and better aligning calculation of the minimum interest rate with commercial transactions.

The government considers that delaying the start date by 12 months will allow additional time to further consult stakeholders and refine the Governments implementation approach.

This gives taxpayers a further 12 months to address these issues.

Tax exemption for North Queensland floods grants

The Government will provide an income tax exemption for qualifying grants made to primary producers, small businesses and non-profit organisations affected by the North Queensland floods.

Qualifying grants include Category C and Category D grants provided under the Disaster Recovery Funding Arrangements 2018, and grants provided under the On-Farm Restocking and Replanting Grants Program and the On-Farm Infrastructure Grants Program.

The exemption will apply where the grants relate to the monsoonal trough, which produced flooding that started on or after 25 January 2019 and continued into February 2019. The grants will be nonassessable non-exempt
income for tax purposes.

Tax exemption for primary producers affected by Queensland storms

The Government will provide an income tax exemption to primary producers in the Fassifern Valley, Queensland affected by storm damage in October 2018.

The tax exemption relates to payments distributed to affected taxpayers through a grant totalling $1.0 million to the Foundation for Rural and Regional Renewal, working with the Salvation Army and a local community panel.

Unpaid tax and super by larger businesses

The government will increase activities to recover unpaid tax and superannuation liabilities. These activities will focus on larger businesses and high wealth individuals. These measures will not extend to small businesses.