New tax rules that may impact your small business

If you own or operate a small business, you should always look out for new laws, regulations or tax requirements that may have a direct impact on businesses in your industry. The following rules have either come into effect in the recent past or will be instigated in the near future, and they are likely to affect most small businesses in Australia.

CGT concessions have been tightened

The government has always offered small businesses tax incentives to help them grow and employ more people. One such incentive has been the popular Capital Gains Tax concessions. Due to concerns that some businesses are using these concessions for assets that aren’t meant for those particular businesses, the government decided to set up tougher rules. As a result, CGT concessions are now only available to businesses that have an annual turnover of less than $2 million or business assets that are worth less than $6 million. This rule is meant to close down the loophole that allowed businesses to qualify for CGT concessions by structuring themselves in such a way that some of their stakes in larger businesses wouldn’t count when they were subjected to the eligibility tests. If your asset value and turnover fall within the limits that are stipulated, you can still take advantage of the CGT concessions.

The $20,000 immediate deduction has been extended but it may end soon

If your business has an aggregate turnover of less than $10 million, you are eligible for a $20,000 immediate deduction. If you purchase assets worth $20,000 or higher, you can place them in a pool and report their depreciation rate at 15% for the first year and 30% for subsequent years. If the pool’s closing balance after depreciation is under $20,000 as of 30 June 2018, you can write off the final pool balance. It’s important to note that some types of assets don’t qualify for this write-off. After 30 June 2018, the $20,000 deductible will go back to $1,000, so you should take advantage of the deduction when you still can.

New levy for workers on skilled visas

From March 2018 onwards, businesses that hire foreign workers on skilled visas have to pay a levy. This money will go to the Skilling Australians Fund. Businesses with a turnover of more than $10 million will have to pay an annual fee of $1,800 per employee with a Temporary Skill Shortage visa, and a one-time payment of $5,000 for each employee with a permanent visa. Small businesses with $10 million or less in turnover will have to make annual payments of $1,200 per employee with a temporary visa and a one-time fee of $3,000 per employee with a permanent visa. These levies are meant to encourage businesses to prioritize local workers when they are hiring.

Greater compliance for cleaners and courier services

Taxable payment reporting systems have been used to enhance tax compliance in a number of industries so far, and starting on 1 July 2018, they will be used to do the same for contract cleaning services and courier services. From the effective date, all businesses that use the services of these two types of contractors will be obligated to collect information on all business transactions, including payment reports, and submit it to the ATO. The information that’s collected starting July 2018 will have to be submitted in August 2019. Even if you are not a cleaning company or a courier service, your business is still affected by this new rule if you make use of such services. It’s unclear whether there will be penalties for businesses that don’t report on their cleaning and courier contractors, but just to be safe, you should keep clear records of all your dealings with such businesses.

 

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