Tax & Accounting

What the 17/18 Budget means for Small Business

Company Tax Rate Reduction

The government has re-committed to see the company tax rate reduce to 25% over the coming 10 years including extending this reduction to incorporated entities with up to $50million turnover.

Financial Year Aggregated Turnover less than       Company Tax Rate
2016-17 $10m 27.5%
2017-18 $25m 27.5%
2018-19 $50m 27.5%
2019-20 to 2023-24 $50m 27.5%
2024-25 $50m 27%
2025-26 $50m 26%
2026-27 $50m 25%

Small Business Measures

The Enterprise Tax Plan bill recently passed by the Senate also includes the following measures for small business

  • Increase in aggregate turnover threshold to $10m in order to be considered a ‘small business’.  However, note that this increased threshold does not extend to access to small business CGT concessions, which remains at $2million.
  • Increase in unincorporated small business tax discount from 5% to 16% over a 10-year period.  However, the cap on the offset remains at $1,000 – so in reality there is little real benefit to unincorporated entities of the rate increase.

Extension of $20k immediate write off

Small Businesses will continue to be able to access immediate write-off deductions for assets valued up to $20,000 for another 12 months.  In addition, due to the Enterprise Tax Plan rule the aggregate turnover of small business has increased to $10million, allowing even more businesses to access this deduction both for the 2017 and 2018 years.

Levies for skilled visas

If your business employs foreign workers on certain skilled visas you will be required to pay a levy.

  • If your business turnover is less than $10m the levy will be either $1,200 for each employee on a Temporary Skill Shortage Visa or $3,000 for each employee being sponsored for a permanent Employer Nomination Scheme.
  • If your business turnover is more than $10m the levy will be either $1800 for temporary skill shortage visas or $5,000 for Employment Nomination Scheme

The levies collected above will contribute to the Skilling Australians Fund that will train Australians in apprenticeships and traineeships in high demand occupations.  When matched with funding from the States it is estimated that up to 300,000 additional apprentices, trainees and higher level skilled Australians will be supported over the coming 4 years.

Extension of Taxable Payments Reporting

Contractors in the courier and cleaning industries will be included in the Taxable Payments Reporting System (TPRS) from 1 July 2018.

Currently this system imposes reporting obligations to businesses in the building and construction industry, whereby they must report payments made to suppliers.  Reporting frequency will move back to annual reported from quarterly.  The first annual report for affected couriers and cleaners will be due in August 2019.

This move is to extend the data matching capabilities of the ATO in tackling the Black Economy.  Most up to date software programs will assist businesses affected to meet their obligations.

GST

Digital Currencies

GST treatment of digital (crypto) currencies will be aligned with that of money.

Previously the government didn’t consider crypto currencies to be either foreign currency nor a financial supply and thus concluded that GST should be applied to its sale.  However, this resulted in double taxation for GST purposes.  With effect from 1 July 2017 changes will be made to ensure that the purchase of digital currency is not subject to GST.

New Residential Premises

It is proposed that from 1 July 2018 purchases of new residential premises will be required to remit the GST portion of their purchase directly to the ATO.

This measure has been raised to deal with developers frequently failing to remit GST on new residential sales despite receiving the funds from the purchaser.  It is expected that this will have little impact on purchasers as many use conveyancing services on settlement, however for property development businesses it will mean that the GST portion of sales will not be received and these funds will not be available to meet operational needs between activity statement reporting periods.

Crowd Sourced Equity Funding

The Government will extend access to Crowd Sourced Equity Funding to proprietary companies.  Previously these measures required a company to become a Public Company.

Whilst proprietary companies will be able to have an unlimited number of shareholders, higher reporting and governance requirements will apply to provide protection to shareholders.  These obligations include:

  • minimum of 2 directors
  • financial reporting in accordance with accounting standards
  • audit requirements
  • restrictions on related party transactions
  • minimum shareholder rights to participate in exit events.

We still suggest thorough consideration be given to the additional reporting requirements and cost of these prior to any company entering into raising equity through crowd sourced funding.

 

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