Following our breakdown of the budget yesterday, let’s take a deeper dive into some of the specifics that will affect you as a small business owner. Even with a mixed bag that tended toward mediocrity for small business owners, there are some serious considerations for many verticals out there that need to be unpacked.
That $20,000 dollar win
One of the big ones. As many industry insiders predicted, (as well as us here at Reckon, aren’t we clever?) the $20,000 instant asset write-off scheme has been given a new lease on life for at least another year. According to our recent small business survey,
“91 percent 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” – Sam Allert
What it means for you
Firstly, you need to meet the criteria, so be sure you are turning over no more than $10 million and that the business related asset is in use or installed by 30 June 2019.
Are you a tradesman in need of new tools? Do you own a studio with printing equipment? Are you in need of a new van for your fruit delivery business? This one is for you, so don’t get stuck in the 39 percent of businesses yet to take advantage!
The R&D disappointment
Yes, this was a great slap to innovation in Australian small business who partake in Research and Development and claim as such in their tax. Although the government will be using this reform to hone in on tax fraud in relation to claiming for R&D, effectively the environment has become unpalatable for innovative companies in this space. This will affect you quite significantly if you claim for R&D, so get across this immediately to stay ahead and prepare your business.
So if your business is claiming R&D, let’s see how you are affected.
Under $20 million?
Let’s say you are a small fintech startup turning over under $20 million. What specifically will this change mean?
- Introduce a $4 million annual cap on cash refunds.
- The refundable R&D offset will be a premium of 13.5 percentage points above the company’s tax rate.
- Offsets that cannot be refunded will be rolled over as non-refundable tax offsets.
Over $20 million?
How about an established software development house earning over $20 million a year? Let’s see the changes:
- The upper limit of R&D expenditure eligible for offsets will be elevated from $100 million to $150 million.
- The government will introduce an R&D premium that ties the tax offset to the intensity of R&D expenditure.
Cash is no longer king
The black economy is again in the cross hairs with crackdowns on cash payments, fraud, money laundering and untaxed, undeclared revenue. Many industries will see a lot more scrutiny alongside a restriction on cash payments to businesses.
First up, a new measure to help curtail illegal payments. Businesses will no longer be able to receive more than $10, 000 in cash as payment going forward.
More reporting for more industries
Furthermore, higher reporting requirements on payments to contractors will be put in place. This scheme, first introduced in 2012 is called the Taxable Payments Reporting System (TPRS). Originally aimed at the construction industry, it’s creeping scope has been expanded yet again into new industries. There are already restrictions and strict reporting requirements for the construction industry, so if you operate in that field you will have already gotten used to this. So what are the newer additions?
New industries affected
Listen up if you have a small business in the following sectors:
- Courier services
- Cleaning services
As already announced in last year’s budget, you will need to be reporting on your payments from this year, starting July 1 2018, so be ready!
How about the new industry additions in this year’s budget?
- Security services
- Computer design
- Road freight
For those operating businesses in these industries you have just been announced to join the TPRS reporting party! But at least you have until July 1 2019 to have all your ducks in a row.
Personal income and your payroll
Let’s say you own a bakery and have 4 employees in the low to middle income tax brackets. Your employees are about to get a boost of around $10 per week. This may even be for you if you fall into these categories.
So how will it affect your business?
Mostly this will be a time for your bakery or any business that has employees on the payroll to do a thorough review and ensure their staff are being taxed PAYG correctly. With Single Touch Payroll coming into effect as well (read our STP guide here), now is as good a time as any to review your payroll or accounting software and ensure you have necessary time up your sleeve to ensure compliance.
At the end of the day, a vast amount of this can be headed up by your entrusted bookkeeper or accountant in conjunction with information gleaned from your cloud accounting app, so make sure your software is updated and ready to go on 1 July 2018. Get on the phone to your financial adviser while you are at it!