The $20,000 Asset Write Off Has Been Extended!

The Government has announced in the budget that it will extend the $20,000 Asset Write Off for another 12 months to 30 June 2019 for businesses with an aggregated annual turnover of less than $10 million. Small businesses will continue to be able to claim a deduction for capital purchases of less than $20,000 first used or installed before 30 June 2019. Capital purchases of greater than $20,000 will continue to be depreciated in the general pool at 15% for the first year and at 30% for subsequent years. The pool balance can be deducted if the balance at the end of the year is less than $20,000.

Tax Deductibility To Be Removed Where PAYG Withholding Obligations Are Not Met

Government to legislate to remove the tax deductibility of wages and payments where PAYG withholding obligations have been disregarded for employee’s wages and for payments made by businesses to contractors where an ABN has not been provided and withholding tax has not been withheld.

Introducing a Cash Payment Limit

From 1 July 2019, the Government is legislating a $10,000 limit for cash payments made to purchase goods and services. This will require transactions over the $10,000 limit to be made by electronic means or by cheque. There are to be exemptions for transactions with financial institutions and for payments from consumer to consumer for non-business transactions.

Extending the Contractor Payment Reporting System

First used for the building and construction industry, the contractor payment reporting system will be extended to cleaning and courier industries from 1 July 2018 and extended to security providers, investigation services, road freight transport and computer system design and related services from 1 July 2019.

Changes Affecting Companies

Division 7A Changes

From 1 July 2019, the government will ensure that unpaid present entitlements or unpaid trust distributions come within the scope of Division 7A. This will apply where a Trust distributes income to a related private company but does not pay the cash distribution. The unpaid present entitlement will be required to be paid to the company, paid over 7 years as a complying loan or is subject to tax as a dividend.

The Government also intends to defer the start date from 1 July 2018 to 1 July 2019 for the 10 Year Enterprise Tax Plan – targeted amendments to Division 7A that was announced in the 2016-17 Federal Budget.

Changes to Combat Illegal Phoenixing

The Government will make changes to the Corporations law and tax laws to help them deter and disrupt illegal phoenixing activity. The changes will including making directors personally liable for the company’s debts and extending the director’s penalty regime to GST, luxury-car tax and wine equalisation.

Research and Development Tax Incentive

From 1 July 2018, the Government will make changes to the research and development tax incentive to improve its integrity and make sure it is fiscally affordable to the Government.

Changes Affecting Trusts

Improving the Taxation of Testamentary Trusts

From 1 July 2019, the concessional tax treatment for income received by minors from testamentary trusts will be limited to income derived from assets that were transferred from the deceased estate into the testamentary trust or the proceeds of the disposal or investment of these assets. Currently, income received by minors from testamentary trusts is taxed at normal adult tax rates rather than higher tax rates that apply to minors. This change will stop people injecting assets into the testamentary trust that didn’t come from the deceased estate and receive a tax benefit from doing so.