What is the proposed measure? The $20,000 instant asset write-off will be extended for another 12 months until 30 June 2018. This was due to revert to $1,000 on 1 July 2017. Under this measure, small businesses (with aggregated turnovers of less than $10 million) will be able to immediately deduct purchases of eligible assets costing less than $20,000 first used or installed ready for use by 30 June 2018. Who will it affect? Taxpayers that carrying on a business and have aggregated annual turnover of less than $10 million. When will it apply? From 1 July 2017, the $20,000 threshold will be extended for another 12 months until 30 June 2018. Comment:
The tax community have been asking for the $20,000 threshold to remain permanently. Its introduction was very welcome by small businesses. Although this extension of one year is less than what businesses and practitioners desired, it is nevertheless a good step to assisting SMEs. This announcement will provide a boost to SME activity and investment for at least another year.
The annual aggregated turnover threshold to access this concession has also been increased from $2 million to $10 million from 2016-17. The threshold increase along with this Budget announcement means that many more businesses will be able to access this concession than in previous years.
Assets costing $20,000 or more can continue to be placed into the simplified depreciation pool and depreciated at 15% for the first income year and 30% for each income year afterwards. The pool balance can be also immediately deducted if it reduces to less than $20,000 during this period.
This measure is estimated to have a cost to revenue of $650 million over the forward estimates period.
What is the proposed measure?
The Government will amend the small business CGT concessions to ensure that the concessions can only be accessed in relation to assets used by a small business or ownership interests in a small business.
The concessions assist owners of small businesses by providing relief from CGT on assets related to their business that helps them to re-invest and grow, as well as contribute to their retirement savings through the sale of the business. Who will it affect?
Taxpayers:
When will it apply? From 2017-18 Comment:
From the limited commentary in the Budget papers, it is a little unclear as to whether the measure will result in:
We await legislative detail to be made available. In either case, it would appear that this measure will have the effect of restricting the availability of the small business CGT concessions. This is disappointing, especially with the turnover threshold remaining at $2 million while the threshold for all other small business concessions increased to $10 million or $5 million from 2016-17.
A major bank levy will be introduced for Authorised Deposit-taking Institutions (ADIs). The levy will be calculated as 0.015% based on certain liabilities of each ADI’s licensed entities.
Who will it affect?
When will it apply?
From 2017-18.
Comment:
Although this levy is imposed on major ADIs with at least $100 billion in relevant liabilities, it is likely that affected banks and other institutions would pass on at least some, if not all, of the extra cost on to their customers in the form of increased fees and charges.
In the 2016-17 Budget, the Government proposed a 10-year enterprise tax plan that included progressive tax cuts over 10 years for all companies until the corporate tax rate is 25% in 2026-17.
In late March 2017, Parliament passed legislation to give effect to these tax cuts – but only for companies that carry on a business and have an aggregated annual turnover of less than $50 million.
The Government has announced its intention to reintroduce the rest of the original package.
The following is the original enterprise tax plan for all companies.
(A) From 2016-17 to 2022-23
The initial 27.5% rate will be implemented progressively from 2016-17 to 2022-23 based on the company’s annual aggregated turnover:
Annual aggregated turnover threshold
Income year in which the 27.5% rate will apply
Less than $10 million
2016-17
$25 million
2017-18
$50 million
2018-19
$100 million
2019-20
$250 million
2020-21
$500 million
2021-22
$1 billion
2022-23
(B) From 2023-24 to 2026-27
Once all companies are at a rate of 27.5%, the rate will be progressively reduced to 25% in 2026-27:
Who will it affect? Companies with aggregated turnovers of at least $50 million.
From 2019-20.
The Government will try again to pass the corporate tax cuts for companies of all sizes. Given the reluctance by the current Senate and its amendments to the original package before it was passed for companies of less than $50 milllion aggregated turnover, it would be unlikely that the tax cuts for larger companies will be passed anytime soon – unless the Government can offer a sweetener to the dissenting Senators.
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