2019 Budget Special: Business Tax

Author: David Prichard

Small and medium companies are the main beneficiaries of the changes announced in the Federal Budget.There were no specific measures targeted towards large and multi-national enterprises, the increased ATO funding will result in a continuation of recent integrity activities.

Change in Tax Rates

A reduction in the tax rates for small businesses has been accelerated. The current tax rate for businesses with a turnover of less than $50m is 27.5% and this has been earmarked for a reduction to 25% in 2021-22. The proposed reduction in corporate tax rate is 5 years earlier than foreshadowed in previous budgets.

Instant Asset Write off

The existing instant asset write off for assets costing less than $20,000 ($25,000 considering the recent announcement) threshold has been increased to assets costing less than $30,000.Significantly, the scope of businesses that can access the instant access write off has also been increased to businesses that turnover up to $50m.

The changes to the instant asset write-off threshold will apply from 2 April 2019 until 30 June 2020.

Division 7A Changes

The long-awaited changes in relation to Division 7A continue to remain in the wings with the proposed start date of 1 July 2019 being yet again deferred.The revised proposed start date is now 1 July 2020.The October 2018 Consultation paper should have been seen as a pre-cursor to draft legislation, however, the Consultation paper differed from the Board of Taxation review recommendations in a number of significant areas.

The Government advised that it had received valuable feedback from the consultation paper and raised implementation issues that warranted further consideration. The deferred effective date is to enable appropriate transitional arrangements to be included to ensure taxpayers are not unfairly prejudiced.

Whilst the announcement is helpful, the continuing uncertainty only serves to hold back business given the lack of draft legislation or otherwise.

Superannuation Amnesty

Whilst not announced in the budget, the Superannuation Amnesty previously announced appears to be condemned to history.The legislation to give effect to the proposed amnesty was introduced into Parliament on 24 May 2018, however, it remains stuck in the Senate with little chance of progression.The amnesty was intended to be available for 12 months from 24 May 2018 to 23 May 2019.

Australian Taxation Office

The Federal Budget included an additional $1bn in funding for the ATO to continue to drive compliance with the existing tax laws across a variety of taxpayer groups and is expected to yield $3.6bn in additional tax. In recent years the focus has been on multi-nationals and this has driven significantly increased tax revenue, however, the tax gap is now estimated to be higher from individuals ($8.8bn) than from large corporates ($1.8bn).

The additional funding for the ATO is to enable it to continue its recent activity and expand it to review promoters of tax schemes and specialist tax advisers.

Hybrid rules

Further to the recently enacted hybrid rules which impact multi-national enterprises, the Federal Budget includes some clarification measures.The clarifications seek to improve how the rules apply to Multiple Entry Consolidated (MEC) groups and limit the definition of foreign tax.

Should you require further information to the above or have any questions about how this may impact your business, please do not hesitate to contact your engagement partner on 02 9283 1666.