This year’s Federal Budget is providing some positive support for business by extending the instant asset write-off and implementing the first phase of the 10-year Enterprise Tax Plan. Importantly, the Government is also proposing significant initiatives across infrastructure and health which are designed to create “more and better paid jobs” across all markets. Overall however the 2017-18 Federal Budget is disappointing for SMEs.
On a macro level, Treasurer Scott Morrison says that the global economic outlook is good and that we can expect 3% real growth rebound over the next two years. All of this sounds positive however to move the budget back into positive territory there is a crackdown on revenue in the form of more and different taxes – mostly for individuals – designed to fund a number of the reforms already in play such as the NDIS.
If you are in manufacturing, tourism or an Indigenous business then there is a boost for your sector through this budget with funds allocated to stimulate activity and growth. Especially tourism in Queensland and businesses engaged in high technology manufacturing.
Will there be more or less money in your small business pocket this fin year?
The disappointment comes from the poor reach of trickle-down from the larger infrastructure, healthcare and housing affordability programs announced or confirmed. These are isolated to specific geographic locations and endeavours. There is also some skepticism about the “red tape” removal initiatives which the Government is planning to incentivise States and Territories to undertake. Little is known at this stage what this encompasses and whether it’s actually going to be a stimulus for business at all.
Prosperity Advisers Group identified through its recent SME Report that cashflow and business planning were two of the most pressing issues for SMEs, yet this budget hasn’t provided initiatives to help businesses address these. Again, we are seeing Government attempting to run programs for the SME sector when they don’t realistically understand how these businesses run. It makes us wonder how effective any of the “red tape” and other initiatives will be for promoting growth and jobs among SMEs.
In a positive light, an allocation is planned for helping to communicate and provide support for small business owners to access assistance and advice for their business. Chartered Accountants Australia & New Zealand’s recommendation to provide ‘vouchers’ for small business to redeem with their advisers to get professional help from small business experts hasn’t featured in this budget pack. However, it’s early days and remains to be seen what is included in the education initiative mentioned last night, although at $15million over two years, the allocation isn’t huge.
Tax changes for SMEs
The $20,000 instant asset write-off concession will be extended for another year. This now applies to businesses with a turnover of up to $10million since the recently legislated expansion of the definition of a small business which was announced in last year’s budget. It’s noted that this is potentially more valuable in the current year due to the 2% reduction in the top marginal personal income tax rates.
With a focus on minimising revenue leakage, the Small Business CGT Concessions will be tightened to deny eligibility for assets which are unrelated to the small business. This effectively closes a loophole whereby ownership interests in larger businesses did not count towards the tests for determining eligibility for the concessions.
Businesses employing foreign workers on skilled visas will be subject to a new regime including an upfront levy. The levy is designed to fund a new ‘Skilling Australia Fund’. For each employee on a Temporary Skill Shortage visa the levy will be an upfront payment of $1,200 for small business (<$10m turnover) or $1,800 for other businesses. For each employee being sponsored for a subclass 186 or 187 visa the payment required will be $3,000 for small business and $5,000 for other businesses.
While not a tax, the Government announced an increased reporting requirement is proposed for courier and cleaning businesses. The taxable payments reporting system (TPRS) currently in place in the building industry will be extended to contractors in the courier and cleaning industries. Business owners will be required from 1 July 2018 to report payments (individual and total for the year) that they make to contractors. The first annual report will be due in August 2019.
Impact on SMEs from other changes
Business owners will need to keep an eye on the banks as the new major bank levy is rolled through which may result in higher fees and charges across all areas to recoup some of the hit on bank profits. While the Government says banks will be monitored to ensure the levy isn’t passed on to mortgages it’s one to watch carefully for consumers and businesses.
On an individual level there is some good news for taxpayers with taxable incomes which exceed $180,000 – the debt levy of 2% that increased the tax rate for these income earners to 49% will come to an end on 30 June 2017 with no indication that this will be reintroduced. On the counter side however most workers will be hit hard when the Medicare levy increases from 2% to 2.5% of taxable income from 1 July 2019 to fund the National Disability Insurance Scheme.
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