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Budget 2017 : Business

$20k immediate deduction extended for another year

Date of effect:  Extended until 30 June 2018

The $20,000* immediate deduction threshold for assets purchased by businesses with an aggregated turnover of under $10 million will be extended until 30 June 2018. Assets will need to be used or installed ready for use by 30 June 2018 to qualify for the higher threshold.

Assets costing $20,000 or more can be allocated to a pool and depreciated at a rate of 15% in the first year and 30% for each year thereafter. If the closing balance of the pool, adjusted for current year depreciation deductions (ie, these are added back), is less than $20,000 at 30 June 2018 then the remaining pool balance can be written off as well.

The instant asset write-off only applies to certain depreciable assets. There are some assets, like horticultural plants, capital works (building construction costs etc.), assets leased to another party on a depreciating asset lease, etc., that don’t qualify.

The current ‘lock out’ laws for the simplified depreciation rules (these prevent small businesses from re-entering the simplified depreciation regime for five years if they opt out) will continue to be suspended until 30 June 2018.

From 1 July 2018, the immediate deductibility threshold will revert back to $1,000.

* $20,000 exclusive of GST for GST registered businesses. $20,000 inclusive of GST for businesses not registered for GST.

Contractors in the courier and cleaning industries face greater compliance

Date of effect: 1 July 2018

The building industry has faced enhanced compliance and reporting for some time through the taxable payments reporting system. Now it’s the turn of contractors in the courier and cleaning industry.

Under the taxable payments reporting system, businesses are required to report payments they make to contractors (individual and total for the year) to the ATO.

Businesses in these industries will need to collect information from 1 July 2018, with the first annual report required to be lodged in August 2019. Details required to be maintained by the business include:

  • ABN (where known)
  • Name
  • Address
  • Gross amount you paid for the financial year (this is the total amount paid including GST)
  • Total GST included in the gross amount you paid.

Small business CGT concessions tightened

Date of effect: 1 July 2017

The small business CGT concessions will be tightened 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.

The Government is concerned that some taxpayers are accessing the concessions for assets which are unrelated to their small business, for instance through arranging their affairs so that their ownership interests in larger businesses do not count towards the tests for determining eligibility for the concessions.

The small business CGT concessions will continue to be available to small business taxpayers with aggregated turnover of less than $2 million or business assets less than $6 million. The higher small business entity turnover threshold of $10 million will not apply to these concessions.

Banks slugged with ‘major bank levy’

Date of effect: 1 July 2017

A major bank levy will be imposed on Authorised Deposit taking Institutions (ADIs), with licensed entity liabilities of at least $100 billion raising an estimated $6.2 billion over 4 years.

This levy impacts on Australia’s top 5 financial institutions: Commonwealth, Westpac, ANZ, NAB and Macquarie Bank.

Customer deposits of less than $250,000 and additional capital requirements imposed on the banks by regulatory authorities are excluded from their assessed liabilities for the levy.

The levy will be calculated quarterly as 0.015% of an ADI’s licensed entity liabilities, excluding Additional Tier 1 capital and deposits of individuals, businesses and other entities protected by the Financial Claims Scheme. Liabilities subject to the levy will, for example, include: corporate bonds; commercial paper; certificates of deposit; and Tier 2 capital instruments.

To prevent financial institutions affected by the changes from simply increasing interest rates on mortgages to fund the levy, the Australian Competition and Consumer Commission (ACCC) will undertake a residential mortgage pricing inquiry until 30 June 2018. As part of this inquiry, the ACCC will be able to require relevant ADIs to explain changes or proposed changes to residential mortgage pricing, including changes to fees, charges, or interest rates by those ADIs.

Levy on businesses employing foreign workers on skilled visa

Date of effect: March 2018

Businesses that employ foreign workers on certain skilled visas will pay a levy that will be channelled into the Skilling Australians Fund. The new levies replace and increase the existing training benchmark financial obligations, generating an estimated gain of $1.2 billion over 4 years.

For businesses with a turnover less than $10 million p.a.

Businesses with turnover of less than $10 million per year will make an upfront payment of $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 Nomination Scheme (subclass 186) visa or a permanent Regional Sponsored Migration Scheme (subclass 187) visa.

For businesses with a turnover of $10 million or more p.a.

Businesses with turnover of $10 million or more per year will be required to make an upfront payment of $1,800 per visa year 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 a permanent Regional Sponsored Migration Scheme (subclass 187) visa.

Who collects the GST on residential property & subdivisions

Date of effect: 1 July 2018

Under new integrity measures, property developers will no longer manage the GST on sales of newly constructed residential properties or new subdivisions. Instead, the Government will require purchasers to remit the GST directly to the ATO as part of the settlement process.

It seems that under current law (where the GST is included in the purchase price and the developer remits the GST to the ATO), some developers are failing to remit the GST to the ATO despite having claimed GST credits on their construction costs.

The Government expects that as most purchasers use conveyancing services to complete their purchase, they should experience minimal practical impact from these changes.

The practical effect for developers is that they will not have the GST they would have collected to assist with cashflow between the period between settlement and when they would normally remit it to the ATO.

Many new residential properties and subdivided lots are sold under the GST margin scheme which allows the developer to calculate the GST based on the difference between their purchase price and sale price rather than GST applying to the full sale proceeds. It is not clear how this will work under the proposed new rules and whether the purchaser will be able to rely on calculations performed by the developer to meet their obligations with the ATO.

Indexation returned to Medical Benefits Scheme

Date of effect: From 2017-18

Indexation will be reintroduced for elements of the Medicare Benefits Schedule:

  • Bulk billing incentives for General Practitioners will be indexed from 1 July 2017;
  • Standard consultations by General Practitioners and specialist attendances will be indexed from 1 July 2018; and
  • Specialist procedures and allied health services will be indexed from 1 July 2019.

In addition, from 1 July 2020, indexation will be introduced for certain diagnostic imaging items on the MBS, including for computed tomography scans, mammography, fluoroscopy and interventional radiology.

Large multinationals laws tightened further

Date of effect: 1 January 2016

The multinational anti avoidance law will be enhanced so that it applies to:

  • Corporate structures that involve the interposition of partnerships that have any foreign resident partners;
  • Trusts that have any foreign resident trustees; and
  • Foreign trusts that temporarily have their central management and control in Australia.

The amendments apply from the date the multinational anti-avoidance laws began.

Removing double tax on Bitcoin

Date of effect: 1 July 2017

The GST treatment of digital currencies such as Bitcoin will be aligned to prevent consumers who use these currencies paying GST twice.

Digital currency is currently treated as intangible property for GST purposes rather than Australian currency. Consequently, consumers who use digital currencies as payment can effectively bear GST twice: once on the purchase of the digital currency and again on its use in exchange for other goods and services that are subject to GST.

SOURCE: Knowledge Shop

To discuss how this may impact your circumstances please contact PPT on (03) 5331 3711.

DISCLAIMER: The material and contents provided in this publication are informative in nature only.  It is not intended to be advice and you should not act specifically on the basis of this information alone.  If expert assistance is required, professional advice should be obtained.

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