Federal Budget 2018/2019 - Business Changes

2. Changes affecting business taxpayers

2.1 Extending the $20,000 immediate write-off for small business

The Government will extend the $20,000 immediate write- off for small business by a

further 12-months to 30 June 2019 for businesses with aggregated annual turnover less than $10 million.

Small businesses will be able to immediately deduct purchases of eligible assets costing less

than $20,000 first used or installed ready for use by 30 June 2019. Only a few assets are not

eligible (such as horticultural plants and in-house software).

Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed into the small business simplified depreciation pool (the pool) and depreciated at 15%

in the first income year and 30% each income year thereafter. The pool can also be

immediately deducted if the balance is less than $20,000 over this period (including existing

pools).

2.2 Removing tax deductibility of payments where withholding obligations have been

disregarded

From 1 July 2019, businesses will no longer be able to claim a deduction for the following payments:

• Payments to their employees such as wages where they have not withheld any amount of PAYG from these payments (i.e despite the fact the PAYG withholding requirements apply)

• Payments made by businesses to contractors where the contractor does not provide an ABN and the business does not withhold any amount of PAYG (despite the withholding requirements applying).

2.3 Introduction of an economy-wide cash payment limit

From 1 July 2019, the Government will introduce a limit of $10,000 for cash payments made to

businesses for goods and services.

Currently, large undocumented cash payments can be used to avoid tax or to launder money

from criminal activity. This measure will require transactions over a threshold to be made

through an electronic payment system or cheque. Transactions with financial institutions or consumer to consumer non-business transactions will not be affected.

2.4 Expanding the contractor payment reporting system

The contractor payment reporting system was first introduced in the building and construction

industry and extended to the cleaning and courier industries from 1 July 2018.

Under the contractor payment reporting system, businesses are required to report payments to contractors to the ATO. This brings payments to contractors in these industries into line with

wages, which are reported to the ATO.

The Government has announced it will further expand the contractor payment reporting system to the following industries:

• security providers and investigation services;

• road freight transport; and

• computer system design and related services.

Businesses will need to ensure that they collect information from 1 July 2019, with the first annual report required in August 2020. A new online form will make the reporting process easier.

3. Superannuation related changes

3.1 Exemption from the work test for voluntary contributions

From 1 July 2019, the Government will introduce an exemption from the work test for voluntary

contributions to superannuation, for people aged 65- 74 with superannuation balances

below $300,000, in the first year that they do not meet the work test requirements.

Under current law, the work test restricts the ability to make voluntary superannuation

contributions for those aged 65-74 to individuals who self-report as working a minimum of

40 hours in any 30 day period in the financial year.

The work test exemption will give recent retirees additional flexibility to get their financial affairsin order in the transition to retirement.

3.2 Three-yearly audit cycle for some SMSFs

From 1 July 2019, the Government will change the annual audit requirement to a three-yearly

requirement for SMSFs with a history of good record-keeping and compliance. This measure will reduce red tape for SMSF trustees that have a

history of three consecutive years of clear audit reports and that have lodged the fund’s annualreturns in a timely manner.

3.3 Increasing the maximum number of allowable members in an SMSF and small

APRA fund

From 1 July 2019, the Government will increase the maximum number of allowable members

in new and existing SMSFS and small APRA funds from four to six.

This will provide greater flexibility for joint management of retirement savings, in particular for large families.

3.4 Preventing inadvertent concessional cap breaches by certain employees

From 1 July 2018, the Government will allow individuals whose income exceeds $263,157, andwho have multiple employers, to nominate that their wages from certain employers are not

subject to the superannuation guarantee (SG).

The measure will allow eligible individuals to avoid unintentionally breaching the $25,000 annual concessional contributions cap as a result of multiple compulsory SG contributions.

Employees who use this measure could negotiate to receive additional income, which is taxed

at marginal tax rates.

3.5 Deductions for personal contributions

The Government intends to improve the integrity of the ‘notice of intent’ (‘NOI’) processes for

claiming personal superannuation contribution tax deductions. Currently, some individuals

receive deductions on their personal superannuation contributions but do not submit a NOI, despite being required to do so. This results in their superannuation funds not applying the

appropriate 15% tax to their contribution.

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