Federal Budget 2018: What’s In It For Businesses?
The eagerly anticipated Australian Federal Budget 2018-19 was handed down on 8 May, containing a number of measures that will affect small and large businesses alike. As there is an existing proposal to reduce company taxes for all businesses from 30 to 25 per cent – currently stalled in the Senate – there are no new tax measures in this budget.
Last year’s proposal to reduce red tape is also stalled: although the Federal Government pledged $300 million through the National Partnership on Regulatory Reform, it required buy-in from the States and Territories in order to implement the policies. To date, Queensland, South Australia and Victoria have refused to participate, due to concerns that the reforms would harm businesses and workers.
Instead, the focus is on investment in new technology and a crackdown on tax evasion measures.
Much of the Budget is funded by strong business growth and a rise in company tax. The 2017-18 financial year indicates a 22.5% rise in company tax paid, off the back of a strong commodities market and profits from the banking levy.
The Government used the budget to announce a two-pronged plan aimed at stamping out illegal phoenixing activity. Illegal phoenix activity is where a company deliberately goes into liquidation to avoid paying its taxes and/or creditors, and creates a new company to continue the business activities of the old one.
The new plan introduces new phoenix offences to target those who engage in the practice, preventing directors from improperly backdating resignations to escape liability or resigning in certain circumstances. It also extends the Director Penalty Regime to include GST, luxury car tax and wine equalisation tax. It’s hoped that tougher laws will protect small businesses from being ripped off by unscrupulous debtors.
Anti-black market measures
It’s currently estimated that the Australian black market is worth around $50 billion a year. That’s money on which no tax is currently being paid. Some of the measures being put into place, which follow the recommendations of the Black Economy Taskforce, may also affect legitimate businesses and are worth understanding.
Firstly, from 1 July 2019, cash payments over $10,000 made to businesses for goods and services will be outlawed.
Secondly, the government is spending $19.3 million to develop a business case for a centralised registry platform for modernised business registers at the Australian Business Register. This would reduce the instances of multiple paper registers which are not linked and can currently escape fraud detection.
Thirdly, reporting requirements will be tightened up. Businesses will be required to report to the ATO payments to security providers, road freight transporters, computer system design and other related services.
Small business deductions
The instant asset write-off for small businesses has been extended for another year. Businesses with an annual turnover of $10 million or less will be able to deduct the full cost of a business asset costing $20,000 or less in the year it was purchased. Historically, assets over $1,000 were required to be depreciated over a number of years: the measure is intended to improve cash flow issues for small business.
Upskilling older Australians
There are several measures in the budget to encourage senior Australians to stay in work or pursue a new career later in life.
The Government plans to expand their entrepreneurship facilitators program to provide incentives for senior Australians to start their own businesses. There will also be incentives for employers to hire older workers and targeted training for mature job seekers who need to reskill.
Taxing digital businesses
While there’s no concrete measure in place as yet, digital businesses with a significant Australian presence are firmly in the crosshairs. The budget papers identified digital businesses as having the ability to undertake economic activity in Australia without paying tax. It’s likely that a policy will be developed to address the issue.
Research and development
The Government is investing serious money in businesses to support the STEM sector. In particular, $1.3 billion is earmarked through its Medical Industry Growth Plan to support Australia’s medical technology, biotechnology and pharmaceutical sectors. Another $2.4 billion over the next 12 years will boost Australia’s research, science and technology capabilities.
This article was written by Tanya Ashworth-Keppel on behalf of the Australian Institute of Business. All opinions are that of the writer and do not necessarily reflect the opinion of AIB. The following sources were used to compile this article: Australian Financial Review, Business Insider and Budget 2018-19.