Well there we have it folks, the Federal Budget 2018 is in. We have some good stuff in there, some ok stuff, and some relatively negative stuff, but by and large we have not seen any significant new small business boosters since 2015 – the flat trend for small business continues but at least we haven’t walked backwards. Let’s unpack the key themes affecting small business and decide whether these represent a boon or a blow.
The $20,000 dollar wish comes true
It’s an extension! There was much rejoicing.
Small businesses will be able to take another bite of the cherry on this one, with the Government extending the $20,000 instant asset write–off for a further 12 months to 30 June 2019. Small businesses will now have additional opportunities to reinvest in their business and replace or upgrade their assets. Get on it.
We polled over 1,000 small business this year and as a result we received an intimate peek at how many businesses have used this instant asset tax write off and how many intend to:
“According to our survey of 1,000 small business owners, 91 per cent said they’d like the government to extend the instant tax write-off beyond 30 June 2018. However, over one in three (39 per cent) respondents have yet to utilise the incentive, indicating the potential need to better educate Australian small businesses on what they can and cannot write off.” – Sam Allert
Reckon’s MD, Sam Allert continued to comment in the wake of the news that the incentive will indeed be extended as many predicted:
“Any further tax relief for small businesses is always welcomed, as it means they would have more resources to create jobs, expand, and purchase technology and equipment to boost productivity. The $20,000 instant tax-write is evidently a worthwhile incentive, so it’s promising to see the government extended the initiative. As a next step, it should ideally be enshrined in permanency.”
We are certainly not alone here with many high profile voices calling for a permanent extension to this, as well as alternate views that see $20,000 as simply not a high enough figure to cover assets such as machinery or farm equipment. There has even been a push by some to perhaps change this to a $100,000 asset write off, but accessible only once every 3 years. But of course this is nought but hearsay at this stage and the only bankable fact is that you will get another year to take advantage of the existing tax incentive.
So all in all, this has at least avoided a slap in the face by avoiding it’s redundancy and those who can benefit from this need to take their chance and make sure they grab a slice of the pie while they can.
R&D tax incentive blues
Ok, now for some bad news. Unfortunately ‘innovation’ gets a swift kick to the ribs with this announcement. What does this announcement entail exactly? Firstly this will clearly only be a negative if your field lies in the IT space where Research and Development form a key aspect of your operations.
But for those who claim R&D on their tax? You have some onerous reporting to do.
What we are seeing is a change in the way you report on your R&D spend, with businesses now needing to track and report accurately on how much of a percentage your R&D spend is in relation to your total spend. Further caps have also been put in place. For small businesses in particular, this is quite a burden with many claiming it will strangle innovation and unfairly punish small businesses and tech startups in Australia. On the other side of the coin, this may help put the handbrakes on fraudulent R&D tax claims, yet at the expense of law abiding businesses.
“It’s disappointing to see that the government has decided to restructure the R&D Tax Incentive. This will have huge implications on many Australian small businesses that rely heavily on the tax concession to drive research, development and innovation, as well as start-ups who do not have the capacity to work on projects with a substantial R&D spend above industry peers. – Sam Allert
Furthermore, we are seeing as a result of these changes, some wheel clamps being placed on the idea of Australia as an innovation hub. It’s hard to see that as a positive move for the small business space.
Along with these changes, the ATO will now be able to publicly disclose those who requested R&D relief and what the relief was, how much they claimed this measure starts. These changes could jeopardise Australia’s goal of becoming the region’s innovation hub, as more businesses are forced to set up their R&D bases in countries with more supportive government initiatives and funding.”
Personal income gets a ‘milkshake and burger’
Enjoy your milkshake (Scott Morrison’s words, not mine) on this approximately $10 a week increase in income for many low to middle income Aussie tax payers. This is a two pronged fork. On one hand as a tax paying earner, you will most likely see a benefit, especially in the low to middle income brackets.
“The government’s move to reduce the personal income tax over a seven-year plan is a positive step forward not only for hardworking Australians, but for the economy at large. Over the past years, inflationary pressures have inadvertently driven cost of living up, but wage growth has remained relatively stagnant. More needs to be done so everyday Australians’ salaries reflect inflation and current living standards.” – Sam Allert
Furthermore small business could also see a slight uptick in sales due to more stimulus in the economy, theoretically seeing more disposable income in the marketplace to spend on goods and services.
“With a degree of income tax cut, low and middle wage households in particular will have better purchasing power and spend more, in turn stimulating local economic activity especially amongst small business retailers.” – Sam Allert
However, we will also see some pressure placed on small business in terms of reviewing payroll for employees and resetting the taxes they need to apply to wages.
The black economy receives a spotlight
In a bid to remove ‘off the books’ cash payments and potentially dodgy tax avoiding chicanery, cash payments to businesses will be capped at $10k. So if you are buying or selling goods to individuals or other businesses, cash in hand over $10k will no longer be allowed.
This can go a long way to evening up the playing field in favour of law abiding businesses whilst going toward ensuring those not playing by the rules pay their fair share and contribute appropriate taxes to the economy.
“This will be bad news for criminal gangs, terrorists and those who are just trying to cheat on their tax or get a discount for letting someone else cheat on their tax,” Treasurer Scott Morrison said.
Tune in this week for a more detailed breakdown on how this affects your industry or small business more specifically. See you soon!