The tax landscape under the new Coalition Government
Apart from the much publicised intention to repeal the mining tax there are other measures that were planned and will now be repealed which will likely have a greater impact on private businesses. We now understand the transitional arrangements for these measures as follows:
Loss carry back measures
It looks like companies will only be able to apply the newly introduced loss carry back rules for a single income year (i.e., the 2013 income year). The Government plans to repeal the loss carry back rules from the start of the 2014 income year. This means that companies that have yet to lodge their 2013 tax returns will still be able to utilise the loss carry back rules for the 2013 income year.
Immediate deductions for small business entities (SBEs) – i.e. those with turnover under $2 million
From 1 January 2014, SBEs will only be able to claim an immediate deduction for depreciating assets costing less than $1,000. SBEs will have until 31 December 2013 to ensure that newly acquired assets are either actually used or installed ready for use to access the existing $6,500 deduction threshold.
Immediate deduction for motor vehicles
The $5,000 immediate deduction for motor vehicles acquired by SBEs will be removed from 1 January 2014. As above, SBEs will have until 31 December 2013 to qualify for the $5,000 deduction by acquiring and using a motor vehicle by this date.
Superannuation guarantee (SG) percentage
The SG percentage will be kept at 9.25% for the 2014, 2015 and 2016 financial years. From 1 July 2016 the SG percentage will rise to 9.5% and will then increase by half a percentage point each year until it reaches 12% for years starting on or after 1 July 2021.
Low income super contribution
The Government plans to remove the rules which currently allow the contributions tax paid on concessional contributions for individuals earning up to $37,000 to be returned. The changes will apply to concessional contributions for financial years starting on or after 1 July 2013.
Income support bonus (ISB)
The Government will remove the ISB which is currently paid twice a year to certain social security recipients. The next instalment of the payment is due to be paid to recipients in March 2014 unless the rules are repealed by then.
Schoolkids bonus (SKB)
This tax-free bonus payment will also be removed. The next instalment of the SKB would be in respect of the “test day” occurring on 1 January 2014 unless the rules are repealed by then.
Geothermal energy exploration deductions
Expenditure incurred after 30 June 2014 on geothermal energy exploration and prospecting will no longer be immediately deductible.
Carbon tax regime to be abolished
The Government has released a consultation paper and exposure draft legislation that will repeal the carbon tax effective from 1 July 2014. While this tax may not have had an immediate effect on the small to medium business community, the removal of the carbon tax is expected to reduce energy costs to these businesses.
The consultation paper notes that the carbon tax will not apply beyond the 2013/2014 income year even if Parliament does not pass the bills repealing the carbon tax legislation until after 1 July 2014.
$2,000 cap on education expenses
The Government announced on 6th November 2013 that it will not proceed with the introduction of a $2,000 cap on the amount you can deduct for work-related self education expenses.
Medicare rebates
With means-testing of the Medicare rebates it is necessary to select the appropriate rebate percentage to apply at your level of taxable income when renewing your private health insurance. Be aware that any difference between your selected rate and what it should have been will automatically be adjusted when you lodge your tax return. This means it is not so critical to be totally accurate in your estimate.
Statutory formula method for car fringe benefits
The former Government has announced that the statutory formula method for calculating the taxable value of car fringe benefits would be removed from 1 April 2014. The announcement caused quite a stir and appeared to have a significant impact on salary packaging arrangements.
However, the new Government has stated that it will not proceed with this plan so it seems the existing Fringe Benefits Tax rules will remain in place (at least for the moment).
