Changes affecting business taxpayers
Increasing and expanding access to the instant asset write-off
The Government has announced that it is increasing and expanding access to the instant asset write-off with effect from 7:30 PM (AEDT) on 2 April 2019 (i.e., ‘Budget night’) until 30 June 2020.
The changes in this regard are twofold, as follows:
- Increasing the instant asset write-off threshold from $25,000 to $30,000. The threshold applies on a per asset basis, so eligible businesses can instantly write off multiple assets.
- Making the instant asset write-off available to medium-sized businesses (the instant asset write-off is currently only available to eligible small businesses).
(a) The instant asset write-off for small businesses
Small businesses (with an aggregated annual turnover of less than $10 million) will be able to immediately deduct purchases of eligible assets costing less than $30,000 that are first used, or installed ready for use, from Budget night up until 30 June 2020. Only a few assets are not eligible (such as horticultural plants and in-house software).
TAX TIP – Claiming an instant asset write-off prior to Budget night
The Government has already legislated a $20,000 instant asset write-off for small businesses, whereby they can immediately deduct purchases of eligible assets costing less than $20,000 that are first used or installed ready for use by 30 June 2019.
However, on 29 January 2019, the Government announced that it would increase the instant asset write-off threshold from $20,000 to $25,000 and extend the write-off for an additional 12 months to 30 June 2020. This means that, when legislated, small businesses will be able to immediately deduct purchases of eligible assets costing less than $25,000 that are first used or installed ready for use over the period from 29 January 2019 until Budget night.
These amendments are contained in the Treasury Laws Amendment (Increasing the Instant Asset Write-Off for Small Business Entities) Bill 2019, which was introduced into the House of Representatives on 13 February 2019 and as at Budget night, remains before the House.
As a result, assuming relevant legislation is enacted as proposed, the instant asset write-off threshold applicable to small business taxpayers in the 2019 income year is as follows:
- 1 July 2018 – 28 January 2019: less than $20,000.
- 29 January 2019 – before 7.30 pm (AEDT) on 2 April 2019: less than $25,000.
- From 7.30 pm (AEDT) on 2 April 2019 – 30 June 2019: less than $30,000.
Small businesses can continue to place assets which cannot be immediately deducted under the instant asset write-off into the general small business pool and depreciate those assets at 15% in the first income year and 30% each income year thereafter. A low pool balance (i.e., the closing balance prior to current year depreciation deductions) can also be immediately deducted if it is less than the applicable instant asset write-off threshold at the end of the income year.
Further to this, 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 2020.
(b) The instant asset write-off for medium-sized businesses
Medium-sized businesses will also be able to immediately deduct purchases of eligible assets costing less than $30,000 that are first used, or installed ready for use, from Budget night (i.e., 7:30 PM (AEDT) on 2 April 2019) to 30 June 2020. A medium sized business for these purposes is one with aggregated annual turnover of $10 million or more, but less than $50 million.
To be eligible, medium-sized businesses must also acquire these assets after Budget night to be eligible (as these businesses have previously not had access to the instant asset write-off).
As medium-sized businesses do not have access to the small business pooling rules, they must instead continue to depreciate assets costing $30,000 or more (which cannot be immediately deducted) in accordance with the existing depreciating asset provisions of the tax law.
Proposed Division 7A changes deferred
The Government has announced that it will defer the ‘start date’ of the proposed Division 7A changes by one income year, from 1 July 2019 to 1 July 2020.
By way of background, the Government initially announced the Division 7A changes in the 2018/19 Federal Budget, and followed this announcement with the release of a Treasury consultation paper in October 2018: “Targeted amendments to the Division 7A integrity rules”. While the Government has recommitted to reforming the Division 7A regime, the ‘start date’ has been deferred.
Expanding Single Touch Payroll
The Government has announced that it will support the expansion of the data collected through Single Touch Payroll (‘STP’) by the ATO and the use of this data by Commonwealth agencies.
STP data will be expanded to include more information about gross pay amounts and other details. These changes will reduce the compliance burden for employers and individuals reporting information to multiple Government agencies.
Furthermore, from 1 July 2020, the Government will simplify and automate the reporting of any employment income for welfare (i.e., social security) recipients through STP.
Strengthening the Australian Business Number system
The Government will strengthen the Australian Business Number (‘ABN’) system to disrupt black economy behaviour by requiring ABN holders to do the following:
- Lodge their income tax return if they have an income tax return obligation from 1 July 2021.
- Confirm the accuracy of their details on the Australian Business Register annually from 1 July 2022.
Currently, ABN holders are able to retain their ABN regardless of whether they are meeting their income tax return lodgment obligation or the obligation to update their ABN details.