The 2018 Federal Budget is focussed on helping Australian small businesses grow and adapt to the changing economy. While these changes are still to be finalised, there are a number of proposed expenditures and schemes that could be a positive step forward for small businesses in Australia. Let’s take a look.
Instant asset write-off scheme extended
Small businesses now have 12 more months to make the most of the federal government’s instant asset write-off scheme. According to the new federal budget, the scheme will now expire in June 30, 2019.
Extending the scheme is designed to help improve cash flow for small businesses and boost activity and investment for another year. While small business owners may have been hoping it would become a permanent fixture of the tax system, another year is certainly something to celebrate.
Note that when the scheme was first introduced, it only applied to businesses turning over up to $2 million annually. However, this was extended to $10 million in 2017 and will remain at $10 million for the following year.
Changes to research and development offset scheme
The government has also made changes to the research and development offset scheme, specifically for companies with turnovers of $20 million or more. For businesses earning over $20 million, the R&D premium will compare the rate of offset to the intensity of R&D expenditure. The maximum amount for R&D expenditure eligible for tax offsets will increase from $100 million to $150 million.
As of 1 July 2018, there will also be a $4 million cap on cash refunds available for companies with an annual turnover of less than $20 million.
10-Year Enterprise Tax Plan
As part of the 10-Year Enterprise Plan, the turnover threshold for small and medium businesses to be eligible for the 27.5% tax rate, has been increased from $25 million to $50 million. This means a number of businesses will benefit from a lower tax rate as of 1 July 2018.
More small businesses can now also access a variety of tax concessions, with the small business entity turnover threshold rising from $2 million to $10 million.
Recognising that small businesses are the engine room of the Australian economy the Federal Government has implemented changes to simplify BAS reporting requirements.
The Federal Government continues to streamline the GST reporting processes for small business. Instead of the 20 question Business Activity Statement, businesses now only need to respond to three key questions.
This simpler approach to GST reporting means that small businesses using QuickBooks can focus on growing their business rather than filling in complex BAS forms.
PAYG and Single Touch Payroll
The introduction of Single Touch Payroll (STP), effective on the 1 July 2018 for employers with 20 or more employees, is intended by the government to reduce the regulatory burden on business by aligning payroll functions with regular reporting of tax and superannuation obligations.
New STP reporting obligations will also mean that small business owners are unable to claim tax deductions for wage and contractor payments they have made, if they have not withheld tax as required under the Pay-As-You-Go (PAYG) regime.
This means business owners need to correctly identify all circumstances where they need to withhold taxes, as it pertains to employees, foreign employees working in Australia or Australians working overseas and contractors.
Entrepreneurship Facilitators Program
The Federal Government has proposed $17.7 million over 4 years for its Entrepreneur Facilitators Program. This extended training and mentoring program will have an increased focus on mature age people to promote entrepreneurship and new business opportunities.