Last night, the Treasurer Josh Freydenberg delivered pre-election Federal Budget announcing that Australia is in surplus for the first time in 12 years.

Key small business announcements in 2019-20 budget include:

Instant asset write-off

The Government has announced that it will:

  • increase the instant asset write-off threshold from $25,000 to $30,000; and
  • expand the instant asset write-off to make it available to medium-sized businesses (aggregated annual turnover of $10 million or more, but less than $50 million), in addition to small business entities (SBEs).

Assets eligible for the immediate write off assets must cost less than $30,000 and be:

  • for SBEs — first used, or installed ready for use, from 7.30pm (AEDT) on 2 April 2019 until 30 June 2020;
  • for medium sized businesses — acquired and first used, or installed ready for use, from 7.30pm (AEDT) on 2 April 2019 until 30 June 2020.

The Government intends to proceed with its previously announced measure to allow SBEs an instant asset write-off for eligible assets costing less than $25,000 (increased from the current threshold of $20,000) that are first used or installed ready for use from 29 January 2019 until 7.30pm (AEDT) on 2 April 2019.

Deferral of proposed changes to Division 7A company loan

In the 2016-17 Budget, the Government announced it will make targeted amendments to improve the operation and administration of Division 7A of the Income Tax Assessment Act 1936 (Division 7A). The amendments were to apply from 1 July 2018.

As part of the 2018-19 Budget, the Government announced it will further clarify the operation of the Division 7A integrity rule. The changes were to apply from 1 July 2019.

Yesterday, the Government announced that it will further defer the start date of proposed amendments to Div 7A from 1 July 2019 to 1 July 2020.

The proposed changes may have significant impacts on private company’s cash flow to meet loan repayments. The proposed changes will amend Div 7A by:

  • introducing simplified loan rules — pursuant to which the current 7-year and 25-year loan models will be replaced by a single 10-year loan model (subject to a two-year transitional period for existing loans of 1 July 2019 to 30 June 2021);
  • requiring that unpaid present entitlements — i.e. amounts to which a private company is presently entitled from a trust and which are not paid to the company — are paid out or put on complying loan terms;
  • allowing taxpayers to self-correct their arrangements without penalty;
  • introducing legislative safe harbour rules for provision of assets for use; and
  • making various technical amendments, e.g. clarifying that s. 109M (about loans in ordinary course of business) is confined to money lending businesses.

Black Economy – Strengthening the Australian Business Number (ABN) System

The Government has announced that it will strengthen the Australian Business Number (ABN) system to disrupt Black Economy behaviour by:

  • from 1 July 2021 — requiring ABN holders, with an income tax return obligation, to lodge their income tax return; and
  • from 1 July 2022 — requiring ABN holders to confirm the accuracy of their details on the Australian Business Register annually.

Addressing sham contracting

The Government has announced that it will establish a sham contracting unit — within the Fair Work Ombudsman — to address sham contracting behaviour engaged in by some employers.

The new unit will focus on employers who knowingly or recklessly misrepresent employment relationships as independent contracts to avoid statutory obligations and employment entitlements.

Sham contracting’ occurs when a standard employment relationship is wrongly presented as an independent contracting arrangement. This can be employer initiated, where the motivation is to avoid having to pay award wages, PAYG withholding, payroll taxes and superannuation contributions.

Single Touch Payroll (STP) expansion

From 1 July 2019 STP reporting to the ATO of salary and wages, PAYG withholding and superannuation contribution information will apply to all employers. The Government will now use this data for other Commonwealth Agencies (such as social security) to assist with other programs.

Small businesses that will be subject to STP are encouraged to review their payroll processes now to ensure they are STP compliant from 01 July 2019.

Need Help?

If you would like any further information on how the Federal Budget 2019-20 will affect you, please click here to submit an online enquiry form or call us on 1300 QUINNS (1300 784 667) or on +61 2 9223 9166 to arrange an appointment.

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