Posts in Tax Changes
Have you Restructured your Business Lately?

Many business owners decide to change their structure, often from sole proprietor to company or from partnership to company. But what happens with tax consequences?


When you sell a business, you would usually be up for paying income tax since the business has been sold or transferred its assets.

But when you change the structure of your business, ownership of the assets doesn’t change - so the ATO have a rollover process. This allows you to transfer assets as part of a restructure without having to pay income tax on that transfer. Yeah!

However, there used to be other tax consequences of transferring depreciating assets when undergoing a restructure. For example, a company transferring a depreciating asset (such as a ute/car, plant and equipment) to a sole trader could inadvertently create a dividend.

With the latest tax change in November 2018, there will no longer be any income tax consequences when your restructure involves the transfers of depreciating assets. This will automatically apply.

Remember, registered tax agents like Team Accounting can help you with your tax planning and compliance.

Your Opinions Wanted on Payment Delays

The ATO writes that invoice payment times in Australia are among the worst in the world, with invoices paid on average, 26 days late. This can affect your cash flow significantly.

The Australian Small Business and Family Enterprise Ombudsman has announced an urgent review of payment times, to measure how late or extended payment practices affect the cash flow of small businesses and family enterprises.

The Ombudsman wants to hear your experience with payment times and what is on your contracts to customers.

Fill out the survey out here: Payment times and Practices

Information gathered will be used to provide advice on how late and extended payment practices might be improved in small businesses.

Instant Asset Tax Write-off for Small Business

The $20,000 allowable threshold for an instant asset depreciation has been recently extended to 30 June 2019. What does this mean?

If your business buys an asset which costs less than $20,000, you can write off the business portion in your tax return for the relevant income year. (Or more accurately, your accountant will do this on your behalf).

You are eligible to claim an immediate deduction for the business portion of each asset (new or second hand) costing less than $20,000 if:

  • Your business had a turnover less than $10 million (from 2016 onward), and

  •  The asset was first used or installed ready for use in the income year you are claiming it in.


If the asset is $20K or over, then it will continue to be deducted over time using the general small business pool.

More here:$20,000-instant-asset-write-off/

and at the ATO here:

Keep your ABN Active and Tax Returns Lodged

Are you a sole trader, trust, or partnership who has not lodged an income tax return or BAS for a long while? 

If your ABN is inactive for more than two years, your ABN might be cancelled once the Australian Business Register (ABR) is checked. These checks will be happening throughout 2018.

Not only do you need to keep any business name details up to date (and paid for through ASIC), your ABN details also need to be kept active. This can be done through lodgements to the ATO (Australian Tax Office).

Of course, if you cease trading, you should advise the ABR.


Small sole traders - please lodge your tax returns

Smaller sole traders with income below the tax-free threshold (of $18,000) often believe that they have no need to lodge an income tax return. However, they must lodge the individual tax return, including the supplementary section and business/professional schedule (for individuals), regardless of this. That way, the ABN will remain as ‘active’ in the ABR register.

By the way, if you don’t lodge tax returns through a registered tax agent, you have until 31 October to lodge your tax for the financial year 2017-18. If you use an agent to lodge, like Team Accounting, then the closing date is more flexible. Prior years tax returns should be lodged as soon as possible to avoid a penalty.

Just like the public does, you can use the ABN lookup to see your business status and GST status.

What Rate of Company Tax will you Pay?

There seems to be some confusion around company tax rates, especially whether a small to medium business is eligible for the lower tax rate.

The lower tax rate of 27.5 percent, rather than 30 percent, depends on two factors: whether the business was considered a small business entity in the 2016 and 2017 financial years, and whether it was a base rate entity for the 2018 financial year (the current measure).

A small business entity is ‘a business that has aggregated turnover below $10 million and is trading for at least part of the financial year.’ That was the old measure to determine eligibility for the lower company tax rate in 2016-17. It has been replaced by the base rate entity model.

A base rate entity, according to the ATO, is a company that is carrying on a business which has an aggregated turnover less than the turnover threshold of $25 million in 2017-18.

Which Entity Type is Your Business?

Many of our small business clients will likely fit the description of base rate entity, but always ask us if your business income sits close to those lines.

This lower tax rate of 27.5 percent will remain until 2024-25, whereupon it is planned to fall 0.5 percent and then 1 percent (twice) in three FY stages.   

From this financial year (2018-2019) on, many larger SMEs will enjoy a larger aggregated turnover threshold of $50 million, which will allow many businesses to enjoy this slightly lower tax rate from now on.

Plan your Tax Minimisation

Don’t forget, when planning your expenditures and PAYG for the year, to compare this 27.5 percent tax rate with your own individual income tax rate on drawings and salary. It may not be all that different, but just check. Also discuss this tax planning with your accountant, before making any firm decisions to raise or lower your salary for tax purposes. 

Which Update in the 2018 Federal Budget Affects You?
Photo by from Pexels

Photo by from Pexels

The $20,000 Immediate Write-Off for Small Business is Extended

The Government will extend the $20,000 immediate write-off for small business to 30 June 2019 for businesses with aggregated annual turnover less than $10 million. So, small businesses will be able to immediately deduct purchases of eligible assets costing less than $20,000 first used or installed ready for use by 30 June 2019.  Only a few assets are not eligible (such as horticultural plants and in-house software). 

Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to qualify for the simplified depreciation pool -- depreciated at 15% in the first income year and 30% each income year thereafter. The pool can also be immediately deducted if the balance is less than $20,000 over this period (including existing pools). 


No Withholding Payments - No Tax Deduction

From 1 July 2019, businesses will no longer be able to claim a tax deduction for:

• Payments to their employees such as wages where they have not withheld any amount of PAYG from these payments (despite the fact the PAYG withholding requirements apply). 

• Payments made by businesses to contractors where the contractor does not provide an ABN and the business does not withhold any amount of PAYG (despite the withholding requirements applying).

Other Business Changes

Under the contractor payment reporting system, businesses are required to report payments to some external contractors to the ATO.  In addition to building & construction, cleaning and courier sectors, the Government has announced it will further expand the contractor payment reporting system to the following industries: 

  • security providers and investigation services; 
  • road freight transport; and
  • computer system design and related services.

Personal Tax Changes

Another change that might affect you personally is from 1 July 2018, the Government will increase the topmost threshold of the 32.5% personal income tax bracket from $87,000 to $90,000. The Medicare Levy is no longer changing, and will stay at 2% of income.

Future proposed changes in July 2022 include extending the top threshold of the 32.5% personal income tax bracket from $90,000 to $120,000. But as we all know, a change of Government may well overturn future-dated decisions.


Superannuation Changes

The Government are working to reunite people with their lost Super. Accounts under $6,000 will be effected, from 1 July 2019, the Government will introduce a 3% annual cap on passive fees charged by superannuation funds on accounts. Government will ban exit fees on all superannuation accounts.

The new rules for SMSFs from 1 July 2019 allow a maximum of six (6) rather than four members in a SMSF, which is good news for the joint management of retirement savings in large, working or retired families.

If you have a question about the new May 2018 Budget Changes, or general tax planning, please contact one of our friendly Accountants at Team Accounting today.