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COMPANY AND BUSINESS TAXATION - 2017 FEDERAL BUDGET

Wednesday, 10 May 2017

The main business tax measure which the Government announced in the Budget is a levy on all major banks from 1 July 2017, which will raise $1.6 b billion a year. The levy will be calculated quarterly as 0.015 per cent of a bank’s liabilities. The levy will raise $6.2 billion over the forward estimates.

Other business tax measures include:
• Additional funding for addressing serious and organised crime in the tax system expected to raise $408.5 million over four years; and
• extension of the taxable payments reporting system to contractors in the courier and cleaning industries, expected to raise $318.0 million over four years.

 

Extending the immediate deductibility threshold for small businesses

The Budget extends the 2015-16 Budget measure expanding accelerated depreciation for small businesses by 12 months to 30 June 2018 for businesses with aggregated annual turnover less than $10 million.

The measure is estimated to have a cost to revenue of $650.0 million over the forward estimates period.

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 2018. 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 be placed into the small business simplified depreciation pool (the pool) and depreciated at 15 per cent in the first income year and 30 per cent 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).

The current ‘lock out’ laws for the simplified depreciation rules (these prevent small businesses from re-entering the simplified depreciation regime for five years if they opt out) will continue to be suspended until 30 June 2018.

From 1 July 2018, the immediate deductibility threshold and the balance at which the pool can be immediately deducted will revert back to $1,000.

 

Small business capital gains tax concession crackdown

The Budget proposes to amend the small business capital gains tax (CGT) concessions to ensure that the concessions can only be accessed in relation to assets used in a small business or ownership interests in a small business.

This measure will take effect from 1 July 2017. This measure is estimated to have an unquantifiable gain to revenue over the forward estimates period. The concessions assist owners of small businesses by providing relief from CGT on assets related to their business which helps them to re-invest and grow, as well as contribute to their retirement savings through the sale of the business. However, the Budget says some taxpayers are able to access these concessions for assets which are unrelated to their small business, for instance through arranging their affairs so that their ownership interests in larger businesses do not count towards the tests for determining eligibility for the concessions.

The small business CGT concessions will continue to be available to small business taxpayers with aggregated turnover of less than $2 million or business assets less than $6 million.

 

GST — removing the double taxation of digital currency
The Budget aligns the GST treatment of digital currency (such as Bitcoin) with money from 1 July 2017.
Digital currency is currently treated as intangible property for GST purposes. Consumers who use digital currencies as payment can effectively bear GST twice: once on the purchase of the digital currency and again on its use in exchange for other goods and services subject to GST.
This measure will ensure purchases of digital currency are no longer subject to the GST. Removing double taxation on digital currencies will remove an obstacle for the Financial Technology (Fintech) sector to grow in Australia, the Budget says.
It is estimated to have a small but unquantifiable decrease in GST collections and associated payments to the States and Territories over the forward estimates period.

 

Aligning the tax treatment of roll your own tobacco and cigarettes
The Government will adjust the taxation of roll your own (RYO) tobacco and other products such as cigars, so that manufactured cigarettes and RYO tobacco cigarettes receive comparable tax treatment.
This will be achieved by calculating the per kilogram excise and excise-equivalent customs duty rates on the assumption that the average tobacco content of a cigarette is 0.7 grams, rather than the current assumption of 0.8 grams. Since the average cigarette contains less than 0.8 grams of tobacco, the current tax treatment of RYO tobacco is relatively more favourable. The adjustment to the rates of duty will better align the tax on tobacco regardless of its form.
The adjustment will be phased in over four years, from 2017 to 2020, to match the timing of the previously legislated 12.5 per cent tobacco tax increases, which occur on 1 September each year. The first of the four annual changes will occur on 1 September 2017.
The measure is estimated to produce $360.0 million extra revenue over the forward estimates. This includes an additional GST component of $35.0 million which will be paid to the States and Territories.

 

Click below to view source

Budget Paper 2 Part 1 Revenue Treasury page 12, 21, 22, 24, 25, 38

Budget Paper 2 Part 2 Expenses Social Security page 157

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