It is good to know that small and medium sized businesses (SMEs) have had some wins in the 2017 Federal Budget, however this must be tempered with the fact that these changes are not set in stone quite yet. Until the Budget has passed through both the House of Representatives and the Senate, any of the below proposed benefits to businesses are still up in the air.
Extension to the $20,000 asset write off
If your business has an annual turnover less than $10 Million, the time frame for the end of the $20,000 asset write off has been extended until the end of June 2018. This means that you can purchase eligible assets of less than $20,000 for use in your business and claim a tax deduction for their total depreciation until the end of the financial year 2018 (for example, computer equipment, vehicles and machinery).
The instant $20,000 write off was introduced in the 2016 Federal Budget, but was only applicable to businesses with a $2 Million annual turnover. Not only have they increased this threshold to include businesses with up to a $10 Million turnover, but the government has extended it for another financial year.
Changes to the costs of employing foreign workers
In a bid to create more jobs for Australians, the Turnbull government has decided to end the 457 visa system. This system allows highly skilled foreign workers to stay in Australia for 4 years and to apply for permanent residency at the end of that period.
The new temporary visa system will only allow highly skilled foreign workers to remain here for 2 years and will not allow them to apply for permanent residency. In addition, businesses with an annual turnover of less than $10 Million will no longer pay 1% to 2% of the employee’s salary into training. Instead they will contribute an annual levy of $1200 for each foreign employee on a temporary visa and a one-off fee of $3000 for each employee on a permanent skilled visa.
These new taxes will go towards a newly established Skilled Australians Fund, aimed at providing apprenticeships and training for Australians to fill jobs that currently rely on foreign skilled workers. Whether this new system is a benefit to businesses is controversial, as the new taxes may actually increase annual employment costs for SMEs.
Minimising red tape for SMEs
The Turnbull government has created a new National Partnership on Regulatory Reform aimed at reducing red tape for SMEs. Whilst the actual content of these reforms have not been outlined, the 2017 Budget does have $300 Million allocated to the states, territories and local governments, which will hopefully give them sufficient incentive to simplify regulations and remove duplication across Australia.
If this proposal passes through the government unchanged, it may well reduce the regulatory burden on SMEs, as well as reducing costs and freeing up time.
Increased restrictions on Capital Gains Tax concessions
Currently, SMEs with either an annual turnover of less than $2 Million or business assets valued at less than $6 Million (in total) can claim tax concessions for the capital gains tax on these assets. The new 2017 Federal Budget however, restricts these concessions to only those assets that are used in the business and comes into effect on 1st July 2017.
These changes are designed to give more money back to SMEs, who can use this money to re-invest into their business and initiate growth, rather than paying more money in taxes and possibly, preventing their growth.
No changes to the reduced corporate tax rate
It is good to know that the 2017 Federal Budget has made no changes to the government’s 10 year plan aimed at reducing corporate tax rates to 25% for businesses with an aggregated turnover of less than $50 Million. Currently, businesses with an aggregated turnover of $25 Million will have their tax rate reduced to 27.5% from 1 July 2017, bringing them in line with those having less than a $10 Million turnover who received this tax cut on 1 July 2016.
Ultimately, it is up to the Senate and the House of Representatives to ensure whether or not any of these proposals see the light of day.
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