With the new Coalition Government being elected, they had made an announcement that they would like to repeal or change a few tax-related matters that had been proposed by the previous Labour Government. The following are tax measures that will have an impact on small businesses.
- Minerals resource rent tax (MRRT)
The MRRT law is to be repealed, proposed to take effect from 1 July 2014. There had been a release of the exposure draft on 24 October 2013 where it proposes the discontinuity or changes to some of the measures that were funded by the tax.
- Company Loss Carry Back
It is in the Government’s plan to withdraw the rule relating to Company Loss Carry Back, starting on 1 July 2014. This effectively means this rule will only be applicable for the financial year ended 30 June 2013. For future financial years, it will revert back to the original rule where companies claimed their carry losses as a deduction only against future profits.
- Decrease in the instant asset write-off threshold for small business
Starting from 1 January 2014, small business entities (SBE) will only be allowed to deduct $1,000 as immediate deduction for depreciating assets. To benefit from the immediate write-off of the existing threshold of $6,500, you must ensure that the asset(s) must be in use, or installed and ready to use prior to 1 January 2014.
URGENT ACTION – Should you have planned to purchase assets worth less than $6,500, you should consider buying it before 31 December 2013 to take advantage of the $6,500 instant write-off before it is reduced.
- Repeal of accelerated depreciation for motor vehicles
The Government had also decided to repeal the $5,000 immediate deduction for motor vehicles, effecting on 1 January 2014. For SBEs, you only have up to 31 December 2013 to utilise this deduction.
- Superannuation Guarantee (SG) percentage increase to be re-phased
The previous plan on increasing the SG percentage to 9.5%, which was supposed to start on 1 July 2014, will now be postponed to 1 July 2016. The current 9.25% will remain until then.
- Low income superannuation contribution (LISC) – repealed
For individuals with earnings up to $37,000 a year, they will not be able to get a refund for contributions tax paid on concessional contributions, effective from 1 July 2013.
- Abolition of the income support bonus
The two payments of income support bonus made annually to eligible recipients will no longer be practiced. The repeal will commence on the date of amendment.
- Withdrawal of the school kids bonus
Similar to the above, the school kids bonus will be repealed from the date of amendment.
Other changes
1 December 2013 is the deadline that the Government has set to deal with uncertainties regarding a number of taxes and policies which have been announced but not legislated. Of those already announced are:
- Cap on self-education expenses
It was announced on 6 November 2013 that the Government will not proceed with the $2,000 cap on self-education expenses announced during the last budget.
- Change in Fringe Benefit Tax (FBT) affecting Motor Vehicles
The Government will not proceed with the FBT changes that was supposed to remove the statutory percentage formula for motor vehicles.
- Superannuation pensions
The Government will also not legislate the announced tax changes to superannuation pension earnings above $100,000 a year.
The remaining uncertainties were finalised and announced before Christmas.