Small and medium businesses were the big winners of last year’s budget. It is therefore no surprise that the 2017-18 Federal Budget announcements have been less stimulating. However, there are still tax and business planning opportunities coming out of the Budget which we look forward to assisting our clients with.
Company tax rate
The Government remains committed to its 10-year Enterprise Tax Plan to eventually reduce the company tax rate to 25% for all companies.
The company tax rate changes, as amended by the Senate, (still to be approved by the House of Reps) will see the reduced corporate tax rate of 27.5% apply for businesses with an aggregated turnover of less than $10m in 2016-17; $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.
The corporate tax rate would then further reduce in stages, starting from 1 July 2024, so that it would eventually fall to 25% by the 2026-27 financial year for businesses with an aggregated turnover of less than $50m. However, the government may need to offer a sweetener to have the full 10-year plan pass through the Senate.
$20,000 instant asset write-off extended
The main gift in the Budget for small businesses is the extension of the current instant asset write-off by 12 months to 30 June 2018.
By extending the scheme, small businesses (with a turnover of under $10m from 2016-17) will be able to deduct purchases of eligible depreciating assets costing less than $20,000, as they have since 1 July 2016. This extension provides a welcome, ongoing boost for small business activity and investment for another year.
Small business CGT concessions
Unfortunately, access to the small business CGT concessions will be tightened from 1 July 2017. The government says the tightening is needed to improve integrity by ensuring the CGT concession are only available on assets used in a small business or ownership interests in a small business.
Multi-national anti-avoidance law (MAAL)
The MAAL will be broadened, effective 1 January 2016, to apply 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 aim to prevent the use of foreign trusts and partnerships in corporate structures to side-step the law.
Skilling Australians Fund
Businesses looking to engage an apprentice or trainee have been provided with greater certainty with the provision of $1.5bn over 4 years from 2017-18 to establish a permanent Skilling Australians Fund.
The Fund is designed to support the skilling of Australian workers, and encourage growth in trade and non-trade apprenticeships and traineeships in target areas. It will prioritise:
- occupations in high demand
- occupations with a reliance on skilled migration pathways,
- industries and sectors of future growth
- trade apprenticeships, and
- apprenticeships and traineeships in regional and rural areas.
More about the 2017-18 Federal Budget:
- Economic outlook, infrastructure and development
- Personal taxes largely unchanged; Medicare levy increased
- Housing affordability and availability top budget items
- Government continues to tinker with Superannuation rules
- Read about the key Federal Budget announcements we think will matter most to our readers in our full Federal Budget Wrap-Up