Yesterday, the Australian Federal Government released its budget projections for the 2019 to 2020 financial year. We all heard the catch-cry of the budget being “back in the black” in a curated nod to ACDC. Well, not exactly. First things first, the budget is not in the black yet (that’s projected for next year). These celebratory cries are merely predictions and arguably, premature ones, as they are also contingent on factors outside the Government’s control.
Another thing to note is that this budget comes right before a Federal election. This itself explains why there were expectations (and deliveries) of tax cuts and infrastructure spending. Similar to a gift given under the proviso that you’ll give one back, this budget aims to appease, and please.
The real effects of the budget have largely been clouded by politicisation. In this piece, we’ll provide some insight on what the projections will mean for your business. This is of course, bearing in mind that this may all change next month.
Expansion of the instant asset write-off
It’s no doubt helpful when businesses can deduct their business purchases on their tax returns. Running a business is expensive, with a big part of this cost being equipment and other assets. At the moment, businesses have an instant asset write off in the amount of $20,000 and for businesses who have less than $10 million turnover a year. This amount is set to increase to $30,000 and be available for businesses who have up to $50 million per year in turnover. The effect of this is that businesses will be able to claim more of their assets and have better cashflow.
Gains (albeit small ones) for sole traders
Sole traders have both the advantage and disadvantage of being taxed on their individual income. The advantage lies in that they have less reporting requirements and lower registration fees than being incorporated. However, sole traders have to pay the individual rate no matter their income. The government has also announced that lower and middle-income individuals will receive $1080 in tax relief.
A Government body dedicated to resolving disputes between SMEs and the ATO
A common complaint from small businesses involves their experiences with the ATO. When small businesses challenge a finding made by the ATO, the process can be lengthy and expensive. To combat this, the Government plans to establish a ‘Small Business Taxation Division’ in the Administrative Appeals Tribunal (AAT). However, it must be noted here that the AAT itself has many issues regarding inefficiencies and costliness.
An Australian Business Securitisation Fund
Small and medium-sized businesses can find it difficult to raise capital. However, there are many ways you can do this beyond lending from the big banks. The Government is proposing to increase the viability of smaller lenders so they can on-lend to businesses. However, this likely won’t see fruition for a while, as current regulations will first need to be reviewed by The Australian Prudential Regulation Authority (APRA).
More crackdowns on the black economy
We’ve recently seen crackdowns by the ATO and related government agencies on the black economy. This is due to continue, but will focus on additional situations where businesses avoid paying the correct tax. These include paying staff on a ‘cash in hand’ basis in a bid to avoid taxes such as payroll tax and underreporting income. Further, there is talk of targeting ‘ABN misuse’ and sham contracting.
It’s important to remember that the federal budget is not statement of fact or certainty – it’s a prediction (whether under or over-promised). Fiscal projections are rarely accurate, and this is even more uncertain considering the fact that parliament won’t be sitting again until after the election.
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