Changes small business 2017-2018

Some good news for small business in Federal Budget 2017

The Federal Budget announced on 9 May 2017 delivered no sweeping changes to the small business landscape, and increased compliance is something that most business owners have become used to. However, there was some good news for business owners wanting to continue investing in assets to improve business productivity, profitability, and capacity for innovation.

Here we explain Budget highlights as relevant to small business owners:

Higher instant asset write-off threshold for small business extended
Government re-commits to remainder of 10-year package to further reduce company tax rate
Small business measures
CGT small business concessions: restricted to assets used in business
Taxable payments reporting system extended to couriers and cleaners
Business to pay levy on certain skilled visas

Higher instant asset write-off threshold for small business extended

The Government will extend the current instant asset write-off ($20,000 threshold) for small business entities (SBEs) by 12 months to 30 June 2018. This news was welcomed by business owners who will have another year of encouragement to invest in plant and equipment, and also to businesses supplying plant and equipment to small businesses.

Government re-commits to remainder of 10-year package to further reduce company tax rate

As foreshadowed by the Treasurer recently, the Budget confirmed the Government’s intention to re-introduce the remaining elements of its 10-year Enterprise Tax Plan.

Legislative amendments already passed by the Senate will see the corporate tax rate reduced by companies with a turnover less than $50 million. These Senate amendments are set to approve by the House of Representatives as part of the Budget sittings. As part of the budget, the Government said it remains committed to its 10-year Enterprise Tax Plan to eventually reduce the company tax rate to 25% for all companies.

Corporate tax rate (as amended by Senate)

The company tax rate changes, as amended by the Senate, are summarised in the following table. The changes have been approved by the House of Reps:

In the 2016-17 financial year, the reduced corporate tax rate of 27.5% will apply for businesses with an aggregated turnover of less than $210 m; $25m turnover in 2017-18; and $50m turnover from 2018-19. This effectively implements the first 3 years of the Government’s 10-year plan for company tax cuts.

Company tax rates 2017-2027

Small business measures

In addition to the reduced company tax rate, the Enterprise Tax Plan Bill, as passed by the Senate, includes measures to:

  • increase the small business entity aggregated turnover threshold to $10m from 1 July 2016 – but the threshold for accessing the CGT small business concessions will remain at $2m; and
  • increase in the unincorporated small business tax discount from 5% to 16% over a 10-year period – the threshold for accessing the discount will be $5m (aggregated turnover).

The increase in the small business entity aggregated turnover threshold will enable a greater number of businesses to access concessions such as the simplified depreciation and trading stock rules and a 2-year (instead of 4-year) review period for amending assessments.

Taxable payments reporting system extended to couriers and cleaners

The Government will extend the taxable payments reporting system (TPRS) to contractors in the courier and cleaning industries. Currently, the system only covers suppliers of building and construction services to a purchaser who is carrying on a business that is primarily (over 50%) in the building and construction industry.

CGT small business concessions: restricted to assets used in business

The Government will amend the small business CGT concessions to ensure that the concessions can only be accessed in relation to assets used in a small business or ownership interests in a small business.

However, the Budget papers state that some taxpayers are able to access these concessions for assets which are unrelated to their small business, e.g. through arranging their affairs so that their ownership interests in larger businesses do not count towards the tests for determining eligibility for the concessions.

Business to pay levy on certain skilled visas

From March 2018, businesses that employ foreign workers on certain skilled visas will be required to pay a levy that will provide revenue for a new Skilling Australians Fund.

Businesses with turnover of less than $10m per year will be required to make an upfront payment $1,200 per visa per year for each employee on a Temporary Skill Shortage visa, and make a one-off payment of $3,000 for each employee being sponsored for a permanent Employer Nominated Scheme (subclass 186) visa or a permanent Regional Sponsored Migration Scheme (subclass 187) visa.

Businesses with turnover of $10m or more per year will be required to make an upfront payment of $1,800 per visa for each employee on a Temporary Skill Shortage visa, and make a one-off payment of $5,000 for each employee being sponsored for a permanent Employer Nomination Scheme (subclass 186) visa or permanent Regional Sponsored Migration Scheme (subclass 187) visa.