6 key things all Australian SME’s should be aware of this financial year
The significance to remain on top of all the latest changes from the Australian federal government each financial year (Fondly known as tax time) cannot be overstated. It’s a complicated time and new laws can catch a many business owners and operators unaware. It is for this very reason why we have decided to write this post to help people navigate through this period of transition, highlighting what subtle but important differences that will take effect from July 1st 2018.
Here are some of the top three (3) changes that will impact how SME’s operate this financial year.
What is the definition of a SME?
First and foremost, is the change of what the government defines as a SME (Small & Medium Enterprise). Originally under the labour government in 2015, this was businesses that operated under 2 million dollars a year, which under the liberal government was extended in 2016 to 10 million, and in 2017 to 25 million per annum. Now in FY18/19, the law has extended to a businesses of 50 million a year. This is especially useful for smaller businesses that have large operating capital, equipment investment or turn over to take advantage of the tax breaks for SME’s.
Asset Write Off Scheme extended
The ability for Small to Medium enterprises to immediately write off as a tax deduction up to $20,000 has been extended to June 2019, which will prove very useful when investing in new equipment, training and technology. In the next financial year of 2019/2020, it will revert back to only $1,000, so be sure to take advantage of this offer whilst it lasts.
Directors are now personally liable for unpaid GST
SME Directors are now personally liable for unpaid GST to the ATO, no matter their active role in the business. This is an extension to a previous law that made directors liable for unpaid wages and superannuation. It has also been increased to include wine equalisation tax and unpaid luxury car tax.
Limit on Cash Payments
Whilst a bit further away, from July 1st 2019, SME’s will not be able to accept cash payments of more than $10,000 for goods or services. Payments must be made by cheque or by electronic transfer. This is to curb illegal money laundering and to ensure that income is traceable and accounted for.
Businesses will no longer be able to deduct unpaid (PAYG) wages
In previous years, a SME could claim wages paid to employees for tax purposes, but no longer can they offset this cost in 2019. This also includes deducting wages from contractors who do not provide an ABN.
Research and Development tax incentive
Lastly, introduced this year is Research and Development tax incentive write off’s. This tax break allows you to claim up to $20,000 for R+D purposes (In addition to the Asset write off scheme, you could claim up to $40,000). The criteria are:
- Cannot be an individual or a limited corporate partnership
- Claims must be for the work engaged in the following:
– Must be engaged in activities whose outcome cannot be known or determined in advance on the basis of current knowledge, and proceeds from hypothesis to experiment, observation and evaluation, and leads to logical conclusions
- Business conducted for the purpose of generating new knowledge (including about creating new knowledge or improved materials, products, devices, processes or services).
One last sobering thought is that the federal government has actually increased the funding ($133.7 Million) to the Australian Tax Office this year as well, to combat the Australian ‘black economy’. This is where businesses operate outside the guidelines of the Australian economic system, such as under paying workers or not declaring tax – making it more important than ever to be vigilant about the financial laws regarding SME’s in Australia.
About Marshall Freeman
Marshall Freeman is Australia’s leading debt collection and recovery specialists. Through servicing over 20,000 businesses throughout Australia for over 15 years, we are also an industry leader in providing financial advice, knowledge and education for small and medium sized enterprises.