Treasurer Joe Hockey made a concerted effort on in his first Federal Budget to deliver the Government's blueprint for a "contribute and build" economy, making significant cuts across many areas of government expenditure to, as he said in December, ensure that Australia can live within its means.
The age of entitlement is indeed over. For many lower income taxpayers and those that rely on welfare assistance and subsidies, the impact of the Budget will be a deep hit with the introduction of co-payments that hit the hip pocket and in some cases applies more severe restrictions to eligibility.
A 2% levy on high income earners is a temporary measure that will pay down some of the deficit, however it is a short-term solution that doesn't address the issue of raising sufficient revenue for its spending decisions. In fact, it would appear that the GST debate has been dropped firmly in the laps of State Governments with the slashing of $80 billion from their health and education budgets.
What is most definitely missing from this budget is long-term structural reform, however the government has said it will wait until the Tax Review White Paper is release later this year to address those issues.
While there are more losers than winners in the 2014/15 Federal Budget, for small business owners there wasn't a lot to get excited about and plenty to be concerned about.
For business, left untouched was the reduction in the company tax rate however there will be considerable consolidation of industry and innovation assistance. However the addition of a 1.5% levy to fund the Government's paid parental leave scheme is also in the budget.
There were few measures in the Federal Budget that help small business owners, placing the onus on them to take advantage of incentives that are set to disappear by the end of the financial year and new costs such as fuel excise, the 2% "debt levy" and lowering of instant asset write offs come into play.
Research & Development
Perhaps the most unexpected change is the scale of consolidation and refocusing of public services, with a broad range of small industry assistance and health programs consolidated into larger initiatives that clearly pick winners.
We have yet to see how the government plans to consolidate various agencies and functions, which will be replaced by the Entrepreneur's Infrastructure Programme from 1 January 2015, however if you are involved in R&D in your business, you may want to consider accelerating expenditure by 30 June. The refund rate drops from 1st of July and new expenditure commitments for R&D are drying up.
End of Financial Year is rapidly approaching and as always, tax planning should be on the horizon of small business owners to ensure that they are maximising their opportunities and managing their expenses in line with cash flow projections.
Your cash flow will determine what you can bring forward and defer, however it's worth speaking to your accountant about what the Federal Budget's impact is likely to have on you as a business owner and as an individual, such as:
- The lowering of the company tax rate by 1.5% and the impost of the 1.5% levy for businesses with more than $5 million in taxable income. These are due to start 1 July 2015.
- The flow on effects of changing the fuel excise from its current rate to one indexed to inflation.
- The temporary "debt tax" for high income earners combined with the impact of a higher Medicare levy and other changes such as an increase in the FBT rate to 49%
- Bringing forward expenses and deductions are likely to disappear from 1 July 2014, such as instant tax write offs for assets up to $6500 (due to reduce to $1000 from 1 July) and instant write off of the first $5000 of new motor vehicle purchases for your business.
HECS Repayments discount still available
The discount for repayment of HECS was due to be axed on 1 January, however still exists and if you have an outstanding debt, it may be worth paying down to achieve a discount on your payments.
For more information about how the Federal Budget affects you, your family and your business, please contact us on 02 9957 4033 or via our contact form
Want to keep up to date with tax news for small business? Follow batescosgraveCA on Linkedin, Google+ or Twitter
Last updated May 2014. 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.
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.