Checklist: 2018/19 tax changes for small businesses.
Use this Checklist as a guide to the 2018/19 year-end tax changes to be covered in a client meeting, whether over the phone or in person.
Company tax cuts
For 2018/19 income year, companies with an annual aggregated turnover under $50m will have a reduced tax rate of 27.5%. To be eligible for the reduced rate, the company must be a base rate entity.
Instant asset write-off increased, extended and allowed for medium-sized businesses
The $20,000 instant asset write-off for small business has been increased to $30,000 from 2 April 2019. The scheduled end date of the write-off has been extended from 30 June 2019 to 30 June 2020.
Also, there is another limit of $25,000 which is available from 29 January 2019 to 2 April 2019.
For medium-sized business, which is defined as being over $10m in aggregated turnover but under $50m, an entitlement to a $30,000 instant write-off is allowed until 30 June 2020. The assets must be purchased after 2 April 2019.
Single touch payroll
Entities who are employers are required to report the following information to the ATO from 1 July 2019:
Non-compliant withholders to be denied tax deductions
From 1 July 2019, businesses will no longer be able to claim deductions for payments to their employees where they have not met their PAYG obligations. This includes where the employer is required to withhold PAYG from gross payments, but fail to report or remit it to the ATO.
PAYG withholders will be required to ensure that all lodgements are made on time to avoid large penalties with denied tax deductions.
Additionally, the deduction for businesses on certain payments to contractors which have not met PAYG obligations will be denied unless a genuine mistake has been made.
Taxable payments reporting system
Beginning with the 2018/19 income year, the following industries have introduced a taxable payments reporting system:
Similar business test
A company is now allowed to claim a prior year loss against business profits as long as it satisfies the similar business test from 1 July 2015. This test adds on to the same business test, which was less flexible to pass.
The former same business test is failed unless the company carries on the same business and has not derived income from any new kinds of business or transactions. The new test makes it easier for companies to pass where early investors have entered the company ownership.
As the legislation takes effect as of 1 July 2015, companies in this position have an opportunity to amend income tax returns from the 2015/16 income year. Also, a company going back and amending their tax return to include the company loss deduction would do so in that prior year at a higher company rate. However, careful analysis of the company loss is advised.
Fodder storage assets allowed immediate write-off
For primary producers, a new law has been enacted which allows fodder storage assets to be immediately written off.
Fodder storage assets may include silos and hay sheds, and are used to store grain and other animal feed. The immediate write-off will apply if the asset is purchased and first installed ready for use on or after 19 August 2018.
R&D tax incentive change not law
The research and development (R&D) tax incentive was due to be amended for income years starting 1 July 2018. Under the announcement, the incentive would have been based on an uplift of the entity's corporate tax rate in the particular income year.
However, changes relating to a company’s “R&D intensity percentage” have not become law. All rules as they related to R&D have not changed for companies.