Another year, another Federal Budget! This year brings a lot for small businesses to enjoy, including an extension of the $20,000 instant asset write-off scheme.
Of course, there’s a lot to prepare for. Personal tax cuts mean businesses need to get their payroll in order and there are some key changes to how the R&D offsets work.
Confused about what to do? Don’t worry. We’ve got a handy checklist for you at the end of the blog (but we recommend reading the detail first).
So let’s dive into each topic. What are the key takeaways in the 2018–19 Federal Budget for your business?
Three cheers! A favourite of small business, the $20,000 instant asset write-off scheme is extended for another year. If you’re a small business owner, you can instantly claim any business plant and equipment if you buy it in the 2018–19 financial year.
It just has to be installed and ready for use by then.
Have you been planning any significant expenditures? Now you can be clear about being able to afford in the year ahead.
This is a big one. The Federal Government will give some tax relief for anyone earning under $90,000 with some new offsets. The maximum benefit will be $530. That $530 amount will go down the more you earn, finally tapering off at $125,000.
The government is also raising the $87,000 threshold to $90,000 in the current year.
But wait! There’s more. In the 2022–23 financial year, the 32.5 percent threshold will rise from $37,000 to $41,000, and the 37 percent threshold will rise from $90,000 to $120,000.
But that’s not all. In 2024–25, the government will scrap the 37 percent bracket completely. The 32.5 percent bracket will affect anyone earning $41,000 – $200,000.
You’ll have some tax changes to get shipshape for the year ahead, and even more tax changes for your employees a few years after that. It’s never been more important to get your payroll system up to date and working correctly.
And with Single Touch Payroll coming in 2018 for businesses with more than 20 staff, speak with your accountant or bookkeeper to make sure all your payroll information is up to date and that you are ready to go from July 1.
Do you currently claim R&D on your tax? Well, the government has changed the way these offsets work. Now you need to figure out how much your R&D spend is as a percentage of your overall spending.
The offset is split into two thresholds: one is for businesses making $20 million and under, and the other is for any business earning over $20 million.
– The R&D premium will tie the rate of offset to the intensity of expenditure. Four percentage points for R&D expenditure between 0–2 percent, 6.5 points for between 2–5 percent, 9 points for 5–10 percent and 12 points for 10 percent and above.
– The maximum amount of R&D expenditure eligible for offsets will rise from $100 million to $150 million.
– The offset is a premium of 13.5 percentage points above a claimant’s company tax rate.
– Cash refunds are capped at $4 million per year.
– Offsets that can’t be refunded will be carried forwarded as non-refundable tax offsets.
This is a complex change, and complexity isn’t easy for small business. To be a real benefit, it needs to be easier to administer.
Just another note: the government is cracking down on fraudulent R&D claims by dedicating significant funds to catch people out.
If you’re claiming R&D – then it means A LOT.
For one thing, a lot more effort will go into figuring out how much your R&D spending is proportionate of your overall spending. That means a lot more rigorous documentation and careful reporting.
This could affect how much money you receive. So if you’re expecting some money based on this offset, then it might be wise to think twice about whether those funds are guaranteed.
The bottom line is to precisely document every part of the R&D procedure and work out how to calculate your total proportion of R&D spend.
There are two big initiatives here. The first is the extension of taxable payments reporting to new industries.
The building and construction business has been reporting on payments to contractors for a while now. Couriers and cleaning industries need to track these payments from 1 July 2018 for the first annual report in August 2019. In this budget, the government has extended the reporting scheme to three new industries:
– security and investigation services
– road freight transport
– computer system design and related services
So if you’re in any of those industries, then listen up: Make sure you start tracking these payments from 1 July 2019, with the first annual report required in August 2020.
The second initiative is eliminating cash payments over $10,000. The government is funding the move away from cash payments to stamp out illegal activity, including tax avoidance.
If you’re in these industries, then you need to get ready. Make sure you’re collecting all the relevant documentation from 1 July 2019. Your first report isn’t due until August 2020, but the data needs to be in place from 2019–20.
Speak to your tax professional about how to prepare. Thankfully the Federal Government says the form to submit your report will be a simple online one, but it’s still another report to do.
Talk to your tax professional about how you can get your ducks in a row and how software can help.
Now, for cash payments: if your business regularly makes those types of payments, you’ll need to start considering other arrangements. You’ll no longer be allowed to make these in the future.
Last year the government started a scheme after the 457 visa was axed. Businesses with turnover under $10 million a year need to pay $1200 upfront for each employee on a Temporary Skills Shortage Visa.
Now the government says you can get a refund for that if you meet this criteria:
– The sponsorship application is approved, but the employee’s application is refused on health or character grounds.
– The sponsorship and application are approved but the visa holder doesn’t commence work.
– The visa holder leaves the employer within 12 months of employment, if the visa was for more than 12 months.
If you fall into any of those categories, then speak with your tax professional about contacting the ATO for a refund. Get all your documentation in order and make sure you have proof of what you’re claiming.
Above all, make sure your software is updated and ready to go on 1 July 2018. Start the new financial year in the right way!
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