Highlights for Business

  • The $20,000 immediate deduction for small businesses has been extended
  • Expanding the contractor payment reporting system to Security Providers & Investigation services, Road Freight Transport, and Computer System Design & related services.
  • Cash Payment Limit - Limiting cash payments made to businesses for goods and services to $10,000
  • Reforms to combat illegal Pheonixing
  • Research and Development tax incentive
  • Removing tax deductibility of payments where withholding obligations have been disregarded

Key Points

Extending the $20,000 immediate deduction for small businesses

The Government will extend the $20,000 immediate write-off for small business for another year till 30 June 2019 for businesses with aggregated annual turnover less than $10 million. 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).

Expanding the contractor payment reporting system

The contractor payment reporting system was first introduced in the building and construction industry and extended to the cleaning and courier industries from 1 July 2018. Under the contractor payment reporting system, businesses are required to report payments to contractors to the ATO. This brings payments to contractors in these industries into line with wages, which are reported to the ATO. 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
  • Computer system design and related services

Businesses will need to ensure that they collect information from 1 July 2019, with the first annual report required in August 2020. A new online form will make the reporting process easier.

Cash Payment Limit

From 1 July 2019, the Government will introduce a limit of $10,000 for cash payments made to businesses for goods and services. This measure will require transactions over a threshold to be made through an electronic payment system or cheque. Transactions with financial institutions or consumer-to-consumer non-business transactions will not be affected

Reforms to combat illegal Phoenixing

The Government will reform the corporations and tax laws and provide the regulators with additional tools to assist them to deter and disrupt illegal phoenix activity. The package includes reforms to:

  • Extend the Director Penalty Regime to GST, luxury car tax and wine equalisation tax, making directors personally liable for the company’s debts
  • Expand the ATO’s power to retain refunds where there are outstanding tax lodgements
  • Introduce new phoenix offences to target those who conduct or facilitate illegal phoenixing
  • Prevent directors improperly backdating resignations to avoid liability or prosecution
  • Limit the ability of directors to resign when this would leave the company with no directors
  • Restrict the ability of related creditors to vote on the appointment, removal or replacement of an external administrator.

Research and development tax incentive

For companies with aggregated annual turnover below $20 million, the refundable R&D offset will be a premium of 13.5 percentage points above a claimant’s company tax rate. Cash refunds from the refundable R&D tax offset will be capped at $4 million per annum. R&D tax offsets that cannot be refunded will be carried forward as non-refundable tax offsets to future income years. Refundable R&D tax offsets from R&D expenditure on clinical trials will not count towards the cap.

For companies with aggregated annual turnover of $20 million or more, the Government will introduce an R&D premium that ties the rates of the non-refundable R&D tax offset to the incremental intensity of R&D expenditure as a proportion of total expenditure for the year.

Removing tax deductibility of payments where withholding obligations have been disregarded

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

  • Payments to their employees such as wages where they have not withheld any amount of PAYG from these payments (i.e., 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).