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Last night’s budget reveal was quite positive in many areas but would you expect anything less with an election on the horizon?

Here are the key areas which I feel will have an impact on the majority of small businesses:

  • $20,000 instant asset write-off for Small business extended by 12 months until 30 June 2019
  • Firm stance on ATO Collection of tax and super debts
    • The government has allocated $133.7 million to the ATO to assist with collecting debts. As some of you may know, this has already tightened up over the last 12 months and I am expecting this to only make things harder for business owners struggling with cash flow, as such I highly recommend setting aside GST, PAYG and superannuation either weekly or monthly.
  • No tax deduction for non-compliant PAYG and contractor payments
    • Where no PAYG is withheld against wages or contractor payments where the contractor has not provided an ABN, the deduction will not be allowed. The big issue here for me is the contractor payments and I’d recommend requesting an ABN from each contractor before you make payment and if it is not provided, make sure you withhold 45% of the payment. More information on withholding if ABN provided here
  • Increase in ATO funding to combat the Black Economy
    • The government has allocated $318.5 million to implement additional strategies including new mobile strike teams, increasing audits, a hotline for reporting black economy, improving data matching and increased sharing between government agencies. The hotline for reporting black economy could be a big issue for businesses that are taking cash, a call from a disgruntled employee or customer could have you in the firing line and is a risk worth avoiding.
  • Cash payments limit of $10,000 for cash payments made to businesses
    • I am awaiting more information of this as to how it will affect taxpayers and feel it is more about creating an audit trail for cash, however a deduction could also be disallowed for payments made in cash over this threshold.
  • Reportable payments system extended
    • Taxable payments reporting required by builders will also be required now for security providers and investigation services, road freight transport and computer system design and related services.
  • Personal superannuation contributions
    • The ATO will be modifying tax returns to include a notice of intent to claim deductions for personal super contributions to ensure they are taxed correctly in superannuation funds.

And what about the tax cuts?? There are no benefits for the current financial year, however there is a 3 step plan to reform personal income tax. Step 1 & and the initial phase of step 2 will provide a benefit from next financial year & the later phases of step 2 & 3 are proposed to come into effect 4 and 6 years later.

Step 1 – A new tax offset for low and middle income taxpayers will provide the following benefits:

  • Up to $200 non-refundable offset provided to taxpayers earning up to $37,000
  • Up to $530 non-refundable offset provided to taxpayers earning between $37,001 and $48,000, increasing at 3 cents per dollar
  • $530 non-refundable offset provided to taxpayers earning between $48,001 and $90,000
  • Up to $530 non-refundable offset provided to taxpayers earning between $90,001 and $125,333, decreasing at 1.5 cents per dollar

Step 2 – An increase in threshold of several tax brackets and a low income tax offset increase

  • An increase in the top threshold of the 32.5 % bracket from $87,000 to $90,000 will see taxpayers save up to $135 in tax from 1 July 2018 onwards
  • An increase in the top threshold of the 19 % bracket from $37,000 to $41,000 will see taxpayers save up to $540 in tax from 1 July 2022 onward
  • An increase in the low income tax offset from $445 to $645, will see taxpayers earning up to $41,000 save up to $200
  • An increase in the top threshold of the 32.5 % bracket from $90,000 to $120,000 will see taxpayers save up to $1,350 in tax from 1 July 2022 onwards

Step 3 – Removal of the 37% tax bracket

  • Removal of the 37% bracket and an increase in the top threshold of the 32.5 % bracket from $120,000 to $200,000 will see taxpayers save up to $5,200 in tax from 1 July 2024 onwards

Please let us know if you would like to discuss any other items not included in my update or you would like further information on any of the above.

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