2017-2018 Federal Budget Expert Analysis - Business Taxation

Key points

  • Major bank liability levy to be introduced

  • Multinational Anti-Avoidance Law regime strengthened

  • Commitment to Ten Year Enterprise Tax Plan reiterated

  • Black economy to be targeted

 
The main announcement for business taxation was the introduction of a 0.06% levy on Authorised Deposit-taking Institutions (ADIs) with licensed entity liabilities of at least $100 billion from 1 July 2017. In practical terms this is the five largest Australian banks. This amount will be indexed to grow in line with nominal Gross Domestic Product (GDP). The levy is calculated quarterly as 0.015% of an ADI’s licensed entity liabilities. The levy will not apply to deposits of individuals, businesses and other entities protected by the Financial Claims Scheme. The Financial Claims Scheme provides Government protection for depositors up to $250,000 per account holder per ADI. 

For multinational companies, the Multinational Anti-Avoidance Law (MAAL) regime has been strengthened to counter the use of foreign trusts and partnerships in corporate structures effective from 1 January 2016.

The Government has reiterated its commitment to reducing the tax rate to 25% for all businesses, regardless of turnover, to fulfil its promise of rolling out the “Ten Year Enterprise Tax Plan” originally announced in last year’s Budget. Currently a 27.5% tax rate will apply to companies with an aggregated annual turnover of less than $25 million from 1 July 2017 and for companies with an aggregated annual turnover of less than $50 million from 1 July 2018. The tax rate for companies with turnover under $50 million will be reduced to 27% from 1 July 2024, 26% from 1 July 2025 and 25% from 1 July 2026. The Government has indicated that it intends to reintroduce the remaining elements of its Enterprise Tax Plan in the current sitting of Parliament.

In plans to target the black economy, the Government has extended the Taxable Payment Reporting System (TPRS) to the courier and cleaning sectors, extending it from the construction industry. Further, a ban on the manufacture, distribution, possession use or sale of sales suppression technology has been implemented which allowed businesses to falsify records and avoid paying tax.

 

LexisNexis Capital Monitor Summary:

The instant asset write-off programme and incentive payments for cutting red tape are highlights of the Budget boost for small business this year.  Small Business Minister Michael McCormack will extend the immediate deductibility rules for a further 12 months - to 30 June 2018 - allowing small businesses with an annual turnover of up to $10 million to immediately deduct eligible assets each costing less than $20,000.

The Turnbull Government is set to continue to strengthen the integrity of Australia's tax system by reducing opportunities for multinational tax avoidance and shining a light on the black economy. Action to shut down loopholes and tackle tax avoidance includes introducing a strong Diverted Profits Tax and establishing a Tax Avoidance Taskforce in the Australian Taxation Office (ATO). The Diverted Profits Tax imposes a 40 per cent penalty tax rate on Australian profits artificially shifted offshore by large multinationals. Commencing on 1 July it will provide the ATO with a formidable new tool to stamp out multinational tax avoidance. The Turnbull Government's legislation will prevent large corporates using schemes to avoid Australian taxation by transferring profits or assets offshore through related party transactions that lack economic substance.