articles:

Greater certainty on company tax rates for small business entities

Update of the previous article, 'Investment companies miss out on tax relief' written by Tim Elliot after the bill was introduced to the Parliament of Australia on the 19 October 2017. 
 

As part of the Government’s Enterprise Tax Plan, the corporate tax rate for small business entities (aggregated turnover of less than $10m) has been;

  • cut to 27.5% for the 2017 income year, 

with the turnover threshold for small business entities;

  • increasing to $25m for the 2018 income year, and
  • again increasing to $50m for the 2019 to 2024 income year.  

Company tax changes, a missed tax reform opportunity?

Have we missed the opportunity for meaningful tax reform?

The recent company tax rate reduction drives a wedge between small companies, with draft legislation and the Explanatory Memorandum not addressing key ambiguities.

In a world that is growing increasingly competitive, Australia requires leadership in tax reform and proper implementation more than ever.

Investment companies miss out on tax relief

** Updated 20 October 2017: Please note this bill was introduced to the Parliament of Australia on the 19 October 2017 and as a consequence elements of this article are no longer correct.  Please refer to our update 'Greater certainty on company tax rates for small business entities' by clicking here.

As part of the Government’s Enterprise Tax Plan, the corporate tax rate for small business entities (aggregated turnover of less than $10m) has been cut cut to 27.5% from FY17, with the turnover threshold for small business entities increasing to $25m in FY18 and increasing to $50m in FY19.

However, there has been significant uncertainty in relation to whether companies receiving primarily passive income (including corporate beneficiaries) constitute small business entities and therefore qualify for the lower corporate tax rate. Recent commentary amongst practitioners has certainly supported the possibility.

Are parties really committed to tax reform?

Of late we’ve seen both the major parties make their case for changes to the tax system. Whilst tax reform has been part of the political, business and social landscape for many years, the commitment of government to tackle this issue head on has been somewhat “lukewarm”. One can understand that from a political perspective  addressing wholesale tax reform can be difficult when you do not have a majority government, or the public have become disenchanted and their votes continuously “swing”.

2017 Tax Planning Checklist: Introduction

This paper sets out various items to consider prior to 30 June 2017, for effective tax planning.

  • Taxing of Trade Income

  • Record Keeping

  • Individual Income Tax Rates

  • Temporary Budget Repair Levy

  • Medicare Levy Surcharge and Private Health Care Rebate

2017 Tax Planning Checklist: Deductions

Key Items

  • ​Prepayments - Small Business Entity Taxpayer

  • Prepayments - Not Defined as Small Business

  • Prepayments "Excluded Expenditure"

  • Deductions Under the General Prepayment Rules

  • Bringing Forward Deductions

  • Interest on Investment Loans

  • Bad Debts (if taxation return prepared on an accruals basis)

  • Staff - Bonuses

  • Staff - Holidays

  • Superannuation

  • Superannuation Minimum Contribution

  • Superannuation Co-Contribution – for 2016/17

  • Interest on Loan Funds

  • Repairs and Maintenance

  • Directors’ Fees

  • Travel Deductions

  • Expense Substantiation

  • Depreciation

  • Negative Gearing

  • Building Allowance

  • Borrowing Costs

  • Entertainment

  • Research and Development

  • Property Owner's Deductions

  • Donations and Gifts

  • Audit Fees

  • Salary Packages

  • Working from Home Expenses

  • Expenses for Shareholding Investments

  • Taxation Advice

  • Motor Vehicle Expenses

2017 Tax Planning Checklist: Personal Planning

Key Items

  • ​Zone Offset

  • Sickness and Accident Insurance Payments

  • Home-Office Expenses

  • Utilising Tax Free Threshold

  • Tax Offsets Net Medical Expenses

  • Work Related Expenses

  • Dividends, Interest, Managed Funds Distributions

  • End of Year Tax Schemes

  • Salary Packaging

  • Superannuation Contributions

  • Splitting of Superannuation Contributions

  • Australian Taxation Office Monitoring

  • Motor Vehicle Expenses

2017-2018 Federal Budget Expert Analysis - Executive Summary

This Budget is premised on the principles of fairness, security and opportunity with the Treasurer reporting an underlying cash balance deficit of $29.4 billion for 2017-18. The Government anticipates a significant improvement to the bottom line with a forecasted $7.4 billion surplus by 2020-21 supported by economic growth of 2.75% in 2017-18 and 3% in 2018-19.

2017-2018 Federal Budget Expert Analysis - Health

Key points

  • Medicare Levy to increase by 0.5% from 1 July 2019

  • Medicare Levy low-income thresholds increased

  • Medicare Guarantee Fund to be established to ensure Medicare is fully funded

  • The freeze on the indexation of the Medicare Benefits Schedule (MBS) has been lifted

  • Retention of bulk billing incentives for diagnostic imaging and pathology services

  • Affordable access to medicines continued

2017-2018 Federal Budget Expert Analysis - Property

Key points

  •  Measures aimed at foreign resident property owners
  • Restricting ownership by foreign ownership in new developments

  • GST integrity measure on property transactions

  • Limiting plant and equipment depreciation claim for property investors

  • Integrity measures regarding the Small business Capital Gains Tax (CGT) concessions will be introduced

2017-2018 Federal Budget Expert Analysis - Superannuation

Key points

  • Limited Recourse Borrowing Arrangements to be included in a member’s superannuation balance and transfer balance caps

  • First home owners will be allowed to salary sacrifice to superannuation for home deposits

  • Home sellers 65 years or over can make non-concessional contributions to superannuation

2017-2018 Federal Budget Expert Analysis - Infrastructure

Key points

  • $75 billion in infrastructure funding and financing over the next 10 years

  • Western Sydney Airport to be built

  • Funding of Melbourne to Brisbane Inland Rail project

  • $10 billion National Rail Programme

  • Establishment of a $472 million Regional Growth Fund to deliver job-creating infrastructure

2017-2018 Federal Budget Expert Analysis - Housing Affordability

Key points

  • First home buyers can salary sacrifice into their superannuation account

  • Up to $300,000 from the proceeds of the sale of the family home can be contributed to superannuation for persons aged 65 and over

  • Increasing the CGT discount to 60% for investments in affordable housing

  • Allowing managed investment trusts (MITs) to be used to develop and own affordable housing

  • Further initiatives to increase housing supply

New withholding tax regime for property

“The Australian Tax Office is concerned that non-resident taxpayers are not meeting their tax obligations when they sell Australian property. The solution is this new withholding tax regime,” Costanzo, Moore Stephens’ director of tax and business advisory in WA explains.

When a non-resident sells property with a market value of $2 million or more, the purchaser is now required to withhold 10 per cent of the purchase price, and remit this amount to the ATO.
 

Simplifying income recognition for not-for-profit-entities

On the 28th September 2016 the AASB issued new income recognition requirements for not-for-profit (NFP) entities:

  • AASB 10XX Income of Not-for-profit Entities; and
  • AASB 2016-X Amendments to Australian Accounting Standards – Australian Implementation Guidance for Not-for-Profit Entities.

AASB 2016-X will provide NFPs with guidance on how best to apply AASB 15 Revenue from Contracts with Customers.  These draft standards are now available for comment as a ‘fatal flaw’ draft until 21 October 2016.

How will IFRS 15 Revenue from Contracts with Customers affect you?

The International Accounting Standards Board (IASB) published IFRS 15[1] Revenue from Contracts with Customers in May 2014 effective for reporting periods commencing on or after 1 January 2018.  During the development of IFRS 15 the construction and property industry was identified as one of those most likely to be impacted upon by the new standard[2].  Given the long term nature of contracts within the construction and property industry it is vital that you understand and prepare for the impacts of IFRS 15 now.

ATO Key Agent Program

Moore Stephens is proud to be partnering with the Australian Taxation Office (ATO) on the Key Agent Program that was implemented last year. This program has been co-designed with key stakeholders and influential partners as a way to work through and address the changing environment of taxation in Australia. This whole-of-ATO approach is designed to engage industry leaders and provide the opportunity to feedback on administrative issues and upcoming changes.

Globalisation and the tax system - how taxation affects individuals moving to and out of Australia

 In the modern world, you can conduct business from a coffee shop, on a beach or in an office. With this change and the way products and services are being delivered, we are noticing now more than ever an inflow and outflow of people into and out of Australia. This fundamental shift in society has wider implications and the affects of globalisation on the tax system need to be understood so you can manage your assets.
 

Moore Stephens expands presence in SA and NT

Moore Stephens Australia is pleased to announce it will be expanding its national presence in the South Australian and Northern Territory markets to meet growing client demand. From April 1, Hayes Knight South Australia and Northern Territory will be joining the Moore Stephens network as the new representatives of the respective locations.

Ease of doing business in Australia

We are often asked the question “how easy is it to do business in Australia?”
 
The World Bank Group annually ranks all countries for the ease of doing business and Australia currently ranks in the top 15 amongst the 217 countries measured.

What does your size say?

Last year at the National ASBA conference we asked the education industry what the key challenges facing the sector are, and here is what you had to say.  We have segmented the results by school size based on net recurrent income and here is what we found to be the highest rated challenges. 
 

IFRS 16 Leases - What does it mean for you?

Last week the International Accounting Standards Board (IASB) issued IFRS 16 on Leases. The changes introduced by this standard is likely to increase both assets and liabilities on your balance sheet and you will need to consider the possible impact on any bank covenants such as Debt/Equity ratios. At Moore Stephens, our expert advisors are well equipped to assist you in applying this revised standard. For more information on the change, read the article below and contact us today.