Last week saw the release of the federal budget and the opposition reply. There is a lot of talk of winners and losers across the community, and while the focus has been on strengthening the economy as a whole, aiming for surplus by 2021, business has a large role to play and this budget has some impact for businesses large and small.
Businesses will benefit from the extension of immediate tax write-offs, continued moves to lower the overall tax rate and expanded national spending on infrastructure. At the same time, tax loopholes will be closed and reporting requirements increased for some businesses and activities.
While continuing to support the plan to move to lower business tax rates overall, from 30 per cent to 25 per cent, a plan that is currently held up in the senate, this budget doesn’t ‘throw money’ at the business sector, rather it attempts to support the natural strengthening and growth of the sector through focusing on a stronger economic environment overall, investment in infrastructure and business-specific initiatives to support growth and development, all while targeting ‘lost’ revenue through the closing of tax loopholes and avoidance.
Small businesses will enjoy the continuation of the program to allow for the immediate tax write-off of new equipment and infrastructure costing less than $20,000 until June 30, 2019. Aimed at encouraging investment and growth, this initiative has been a boon. Coming in at an estimated $350 million, the extension of the initiative, initially slated to close this year, will be welcomed by businesses across all sectors.
Wage subsidies have also been extended, allowing businesses to claim up to $10,000 subsidies when engaging certain classes of workers.
These benefits have been balanced with the closing of taxation loopholes and a greater focus on reporting and enforcement, with the budget targeting the ‘black economy’ of underreported revenue. The Black Economy Taskforce recommendations have been adopted and will deliver $5.3 billion over the next four years by targeting underreporting. As part of this initiative, a ban on cash-in-hand payments over $10,000 made to businesses for goods and services will come into effect on July 1, 2019.
Businesses will also be required to report to the ATO all payments made to a list of product and service providers. These additional reporting requirements go beyond the current requirements to report payments to courier contractors and cleaning contractors – to include all payments to road-transport, security, and computer-system providers.
The ATO will also demonstrate a focus on tax avoidance through ‘phoenixing’, where a business closes down to avoid paying creditors, only to reopen with the same director/s but with a new name and new ABN. A new hotline will be established to allow the public to report businesses for cash-in-hand breaches and phoenixing activity. This focus forms part of a larger legislative drive to reduce phoenixing activity, increase legislative penalties and restrict the capacity for directors engaged in this activity to limit their liability, with the aim of increasing personal responsibility.
Speaking on the black-economy reports, Treasurer Scott Morrison said: “Taxes should be lower, simpler and fairer, but taxes must also be paid. Honest and fair businesses and taxpayers are being ripped off by those who think they are above paying tax.”
Addressing the ban on cash-in-hand payments over $10,000 from June 30, 2019, he said: “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.”
In his budget reply, opposition leader Bill Shorten said the budget was not good enough and amounted to a giveaway to big business. He promised to axe the business tax cuts should Labor win power, and instead focus on tax cuts for employees and proportional taxation of wages.
“Labor can afford to do more to help you and your family because we’re not giving $80 billion to big business and the big four banks,” he said.
Labor’s budget-repair strategy expands on the existing policy of limiting negative gearing, curbing income splitting in trust arrangements and bringing an end to dividend imputation.
The discussion will continue over the winners and losers of the budget process, and businesses, small and large alike, will continue to go to work, providing for and investing in the community through services and jobs.
This is an edited version of an article originally circulated by ACAPMA on May 11, 2018.