Here at Gotsis Rubic & Barbariol your Sydney Tax Accountants, we Love Small Business Tax matters, its our bread and butter. In this short article, I shall go on and explain to you, the latest Tax law changes and cover some of the benefits for your Sydney Small Business.
GST Registration
You must register for GST, and charge your customers GST, if your business has an annual turnover of $75,000. However, if your business turnover is lower than this you do not need to apply for GST – although you may decide to register so that you can claim GST on your purchases. From 1 July 2010 the administration of GST is to be streamlined and the cost of compliance reduced.
Small Business and General Business Tax Break
If you are a small business with an annual turnover of less than $2 million, the business tax break for purchasing new depreciating assets or enhancing existing assets by 31 December 2009, has been increased from 30% to 50%. The assets must cost at least $1000 and be first used or installed and ready for use by 31 December 2010. That means that the deduction over the life of the asset would be 150% of its purchase price. If you are eligible this means that you will be able to claim 50% of the purchase price on your tax return in the year that the asset was installed and ready for use of first used.
Example: If you are a small business entity with a turnover of less than $2 million and you purchase a company car for $30,000 on 7 September 2009, and is ready for immediate use in the business, you would receive an additional tax deduction of $15,000 in your 2009-10 income tax return.
If your business has an annual turnover of $2 million or more you will receive a 10% tax deduction.
Research & Development
The R&D Tax Concession will be replaced with a R&D Tax Credit System in 2010-11. The new and simplified Tax Credit system provides a 45% refundable credit for businesses with an annual turnover of less than $20 million. Therefore, you will receive a tax refund of 45% of your R&D expenditure when you file your tax return. This refundable tax credit will also apply to small companies with a tax loss and there is no limit on the level of R&D expenditure. This is equivalent to a tax concession of 150%. If your business turnover is greater than $20million you will receive a 40% non-refundable credit under the new system. This is equivalent to a tax concession of 133%.
The cap for R&D expenditure for the existing R&D Tax Offset has been increased from $1 million to $2 million for 2009-10. This cap is the maximum amount a business can spend on R&D to be eligible for the Tax Offset.
Employee Share Schemes
Substantial changes were made to the taxation of shares and options received under Employee Share Schemes in the 2009 Federal Budget. These changes apply to shares and options acquired after 7.30pm on 12 May 2009, however, will not impact shares or options already held by employees.
Firstly, employees receiving shares or options under Employee Share Schemes can no longer choose to defer taxation on their discount. All discounts are now assessed in the income year in which they are received, whether they are qualifying or non-qualifying. Secondly, the $1,000 upfront concession/tax exemption is limited to employees with a taxable income of less than $60,000 after adjustment for negative gearing losses, fringe benefits and salary sacrifice.
Use of Non-Commercial Losses
These measures, which are intended to apply from the 2009-10 income tax year, will remove the ability of taxpayers to apply for losses from non-commercial business activities against income from other areas such as investment income or salary. The losses from non-commercial business activities can only be offset against income from the business activity. This applies to taxpayers with an adjusted taxable income more than $250,000. If you wish to seek If your adjustable taxable income is $250,000 or less, then the existing non-commercial loss rules apply. Taxpayers will have the ability to seek an exercise of discretion from the Commissioner of Taxation to ignore the new rules where exceptional circumstances exist or where the business being carried on is independently assessed as commercially viable.
The existing non-commercial loss rules will continue to apply to taxpayers with an adjusted taxable income of $250,000 or less.
Division 7A changes
A tightening of the rules of the Division 7A loan rules is proposed in order to increase the integrity of the regime. It will be extended to capture payments by way of a licence or right to use real property and chattels and further captures those transactions conducted by private company shareholders or their associates at less than market value.
Extending TFN Withholding to Closely-Held Trusts
To ensure that assessable distributions to beneficiaries in the trust income tax return aligns with the amounts returned as assessable income by those beneficiaries, there is the intention to extend the current TFN withholding arrangements to closely-held trusts from 1 July 2010. These arrangements are likely to apply to discretionary trusts, other trusts with fewer than 20 beneficiaries, as well as family trusts. If the trustee is tax assessed on behalf of a beneficiary, for example a minor beneficiary, withholding will not apply.
Under these arrangements, the beneficiary must provide their TFN to the fund trustee prior to a distribution being made. No withholding will occur if the TFN is provided, however, if it is not provided them the trustee will be required to withhold tax from the distribution for remittance to the Tax Office. If the latter occurs, the beneficiary will be issued a corresponding tax credit when they lodge their income tax return.
Pre-Paid Interest
If you prepay expenses on items such as rent and insurance, and your annual turnover is less than $2 million, you will be able to claim certain eligible pre-paid expenses in the year the prepayment is made. Eligible expenses will be payments that are made for periods of 12 months or less and that the period of time ends in the next income year.
Payment of Tax Liabilities by Credit Card
You can now make your tax payment using major credit cards – Visa, Mastercard or American Express. A fee of 0.67% applies for Visa or Mastercard credit card and 1.02% for American Express credit card transactions. The payment must be received by the ATO on or before its due date, taking into account extra time needed for payments made on the weekend, public holidays or after 6:00pm Sydney Time. To make a payment you will need the your ATO electronic funds transfer EFT code. You can then pay online at https://www.optussmartpay.com/governmenteasypay-ato/ or over the phone by calling 1300 898 089. The Government EasyPay service will provide a receipt for both the tax payment and the card payment fee.
Tax Fuel Credits
Most businesses can claim fuel tax credits for running machinery, equipment, heavy vehicles and plant used in operating their business. The fuel tax credit rates vary depending on how you use the fuel in your business, and are subject to change. Fuel tax credits cannot be claimed where alternative fuels are used such as LPG, LNG and CNG. To be eligible to claim these credits, your business must be GST registered. You make the claim on your BAS statement being lodged.
