Is the 2019-20 Budget enough to stimulate the economy?

The 2019-20 Federal Budget announced on the 2nd of April 2019 was designed to not only showcase the return to surplus (and by default the Government’s economic credentials) but engage voters with initiatives to make them feel prosperous.

All measures outlined in the budget are reliant on the relevant legislation passing through Parliament which is by no means a given with an election looming.

Active Accounting Group Directors Brett Walker and David Woods watched the budget unfold at the Westpac budget night and have summarised some key take-homes for SMEs in the 2019-20 budget.

Increasing and expanding access to the instant asset write-off

The Government announced that the popular instant asset write-off will be extended until the 30th of June 2020. The instant asset write-off threshold has also been increased from $25,000 to $30,000. This threshold is applied on a per asset basis, which means eligible businesses can instantly write-off multiple assets.
Furthermore, it has been announced in this year’s budget that the instant asset write-off will now be available to medium sized businesses (with an aggregated annual turnover of $10 million or more, but less than $50 million). Previously it was only available to small businesses (with an aggregated turnover of less than $10 million).

ASSET FIRST USED OR INSTALLED READY FOR USE BETWEEN:

SMALL BUSINESS (TURNOVER LESS THAN $10M)

MEDIUM BUSINESS (TURNOVER LESS THAN $50M)

1 JULY 2018 - 28 JANUARY 2019

< $20,000

N/A

29 JANUARY 2019 - 2 APRIL 2019

< $25,000

N/A

3 APRIL 2019 - 30 JUNE 2020

< $30,000

< $30,000


Assets will need to be used or installed ready for use from Budget night by 30 June 2020 to qualify for the higher threshold. Anything previously purchased does not qualify for the higher rate but may qualify for the $20,000 or $25,000 threshold. Similarly, anything purchased but not installed ready for use by 30 June 2020 will not qualify.

For small businesses, assets costing $30,000 or more can be allocated to a pool and depreciated at a rate of 15% in the first year and 30% for each year thereafter. If the closing balance of the pool is less than $30,000 at the end of the income year, then the remaining pool balance can be written off as well.
Pooling is not available for medium sized businesses which means that the normal depreciation rules based on the effective life of the asset will apply to assets that don’t qualify for an immediate deduction.

Deferment of proposed Division 7A changes

Significant changes to the way Division 7A works were intended to start taking effect from 1 July 2019. These reforms have now been pushed back to 1 July 2020.

Division 7A captures situations where shareholders access company profits in the form of loans, payments or the forgiveness of debts. The rules are drafted broadly and have become more complex as amendments close perceived loopholes.

Apprenticeship Incentives

The Government has announced a $525 million budget packaged aimed at boosting jobs in industries with skills shortages. Employers who take on apprentices in areas of need will be offered incentives worth $8,000 per placement and individuals who take up a trade will be offered $2,000. The federal government plan to create an extra 80,000 apprenticeships over five years through these incentives.

Strengthening of the ABN system

From 1 July 2021, Australian Business Number (ABN) holders will be stripped of their ABNs if they fail to lodge their income tax return. In addition, from 1 July 2022, ABN holders will be required to annually confirm the accuracy of their details on the Australian Business Register.

Currently, ABN holders are able to retain their ABN regardless of whether they are meeting their income tax return lodgement obligations or the obligation to update their ABN details.

Extension and Expansion of Tax Avoidance Taskforce

The ATO will be given additional funding to extend the operation of the Tax Avoidance Taskforce. The Government will provide $1billion over four years starting from 2019-20, including $6.5 million in capital funding, to the ATO to extend the operation of the Tax Avoidance Taskforce and to expand the Taskforce’s programs and market coverage. For this, the ATO is expected to produce a $3.6billion budget gain.

The Taskforce undertakes compliance activities and will use the additional funding to expand these activities.
An additional $42 million has been provided to the ATO to recover unpaid tax and superannuation liabilities focussed on larger businesses and high wealth individuals. The measure is expected to create a budget gain of $103.6 million.

Supporting Small Business with Tax Disputes

The Government will continue to provide $57.5 million over a five-year period to the Department of Jobs and Small Business, the Administrative Appeals Tribunal and the ATO to provide access to a fast, low cost and independent review mechanism for small businesses in dispute with the ATO. This is a measure that came into effect from March 2019.

Luxury car refunds increased for primary producers and tourism operators

For vehicles acquired on or after 1 July 2019, eligible primary producers and tourism operators will be able to apply for a refund of any luxury car tax paid, up to a maximum of $10,000.

Currently, primary producers and tourism operators may be eligible for a partial refund of the luxury car tax paid on eligible four wheel or all-wheel drive cars, up to a maximum refund of $3,000. The eligibility criteria and types of vehicles eligible for the current partial refund will remain unchanged under the new refund arrangements.

Increased funding for Export Market Development Scheme

The Government will provide $61 million over three years to support Australian businesses exporting Australian goods and services to overseas markets. $60 million of the funding will go towards boosting reimbursement levels of eligible export marketing expenditure for small and medium enterprise exporters.

All measures outlined in the Budget are reliant on the relevant legislation passing in Parliament and are not guaranteed.

If we can assist with any additional information on the 2019-20 Federal Budget and the impact it may have on your business, please contact our office on (02) 4044 1245.

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