SPECIAL EDITION FOR BUSINESS
PH: 3360 9888 | WWW.PEAKPARTNERSHIP.COM.AU
TAX MATTERS
AN UPDATE FOR SMALL BUSINESS
THE PINNACLE | THE PEAK PARTNERSHIP CLIENT NEWSLETTER
The Federal Government has released an exposure draft of a bill and an explanatory
memorandum addressing the repeal of the Minerals Resource Rent Tax (MRRT).
If this winding back of the MRRT is legislated, it will impact a number of small business
tax incentives which were to be funded from the revenue raised by the MRRT. Those
incentives include:
»» Loss Carry-Back Measures
»» Small Business Instant Asset Write-Off
»» Small Business Immediate Write-Off for Motor Vehicle
This update outlines the possible changes that would accompany the repeal of the
MRRT, and the impact on small business.
REPEAL OF THE LOSS CARRY-BACK MEASURES FROM START OF THE
2013/14 INCOME YEAR
The exposure draft legislation provides for the repeal of the loss carry-back which
allowed companies to carry back tax losses up to a $1 million threshold. The repeal is
with effect from the start of the 2013-14 year and will thus not affect the claiming of a
corporate loss carry back offset for the 2012-13 income year.
REDUCTION OF THE SMALL BUSINESS INSTANT ASSET WRITE-OFF
THRESHOLD FROM 1 JANUARY 2014
The exposure draft legislation provides for the reduction back to $1,000 from
the current $6,500 threshold for depreciating assets, costs incurred in relation to
depreciating assets, and low value pools under the small business entity capital
allowance rules. With the exception of the changes in respect of the low value pool, the
proposed amendments apply with effect from 1 January 2014.
REPEAL OF SMALL BUSINESS RULES FOR MOTOR VEHICLES FROM
1 JANUARY 2014
The exposure draft legislation provides for the repeal of existing rules where a small
business entity can claim a special deduction in respect of a depreciating asset that
was a motor vehicle in the income year in which the motor vehicle was first used, or
installed ready for use, for a taxable purpose. The deduction is equal to the taxable
purpose proportion of the first $5,000 value of the motor vehicle plus 15% of any
additional value.
The remaining value of the vehicle would then be allocated to and depreciated as part
of the small business entity’s general small business pool. As a result of the proposed
change, motor vehicles will be depreciated by small business entities in the same
manner as other depreciable assets. The proposed amendments apply with effect from
1 January 2014.
OUR VIEW FROM THE PEAK
Our suggestion is that, if your small
business entity is considering the
purchase of a depreciating asset that
costs less than $6,500 – or a motor
vehicle for business purposes, you
should make that decision before
1 January 2014. Otherwise, you could
miss out on the current tax savings.
While it is disappointing that the
abolition of the MRRT will come at a
cost to small business in the way of
reduced tax benefits, the MRRT has not
delivered the expected tax revenue
from the mining sector to fund these
initiatives.
As a consequence of these potential
tax changes, small business operators
may need to re-assess their plans to
purchase new depreciating assets and
equipment.
The proposed reduction of the small
business instant asset write-off limit
applies to depreciating assets that are
first used or installed ready for use for
a taxable purpose on or after 1 January
2014. A similar starting date applies in
respect of the cancellation of the small
business rules for motor vehicles, if
these changes are legislated in their
current form.
FOR MORE INFORMATION
Contact one of our Partners by phone
on 3360 9888, or email:
JOHN EALES
johne@peakpartnership.com.au
SALLY PORTLEY
sallyp@peakpartnership.com.au
DAMIAN KNOBLANCHE
damiank@peakpartnership.com.au
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