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Federal Budget 2012/2013

Business might well feel like they have been overlooked in the Budget, but for small businesses, some measures will be very welcome.

Company tax rate reduction scrapped
The Government has scrapped the promised reduction in the company tax rate.  The reduction to 29% was to apply to small business from 1 July 2012 and all other businesses from 1 July 2013.
 
The following small business measures remain in place:
  • Instant tax write off for the first $5,000 of any motor vehicle purchased from 2012/2013 (replaces the entrepreneurs' tax offset)
  • An immediate write off of all assets valued at under $6,500 (up from $1,000)  
  • A write-off of all other assets (except buildings) in a single depreciation pool at a rate of 30%
  • Reduction for one year in PAYG installments using GDP adjustment method
Company loss carry back
As previously announced on 6 May, the Government will enable companies to carry-back tax losses so they receive a refund against tax previously paid.
 
A one-year loss carry-back will apply in 2012/2013, where tax losses incurred in that year can be carried back and offset against tax paid in 2011/2012. For 2013/2014 and later years, tax losses can be carried back and offset against tax paid up to two years earlier. Companies will be able to carry back up to $1 million of losses each year. This measure can provide a cash benefit of up to $300,000 a year.
 
The measure will be available to companies and entities that are taxed like companies. It will apply to their revenue losses only and will be subject to integrity rules, and will be limited to a company's franking account balance.
 
So what does this all mean in practice?  Let's look at an example:
 
ABC Pty Ltd has been operating for a number of years and paid tax of $75,000 in the 2012 income year (i.e., taxable income of $250,000). The company had no carried forward tax losses at the end of the 2012 year.
 
In the 2013 year the company makes a tax loss of $200,000 due to significant investment in new plant and equipment and weaker trading conditions. The company has a franking account balance of $400,000.

The company's refund under the loss carry back rules is limited to the lesser of the following amounts:
  • The tax value of the current year loss (i.e., 30% x $200,000 = $60,000)
  • The tax value of the statutory cap (i.e., 30% x $1m =$300,000)
  • The franking account balance (i.e., $400,000); and
  • The tax paid in the carry back period (i.e., $75,000).
In this case the company can carry back its full tax loss for the 2013 year against the tax paid in the prior year and will receive a cash refund of $60,000. This brings forward the cash flow benefit of the losses rather than having to wait until the company makes taxable profits in future years.  
 
Date of effect
From 2012/2013

Treatment of bad debts
Changes to the treatment of bad debts between related parties irrespective of whether they are members of a tax-consolidated group.  
 
The measure will deny a tax deduction for a bad debt written off, where the debtor is a related party not in the same tax consolidated group. The corresponding gain to the debtor will also not be taxed.  The measure adds $80m to Government revenue over the forward estimates period.
 
No further detail is available at this stage.
 
Date of effect
7.30pm (AEST) 8 May 2012

Wine equalisation tax tightened
The wine producer rebate will be amended to ensure that wine producers cannot claim multiple rebates for the same quantity of wine, beyond the total amount of wine equalisation tax payable.  The measure addresses unintended policy outcomes arising where wine is subject to blending and/or further manufacture.
 
Date of effect
Assessable dealings from 1 July 2012

Budget Details
Click through to the pages below for details about how the Budget affects you.

For the greater good
Individuals
Tax Measures
Superannuation
Compliance
Family & Community
Download the 2012/13 Budget Summary

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Last updated May 2012. This article is provided for information purposes only and should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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Disclaimer

This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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