Budget requires SMEs to consults accountants before it's too late
If you’re a small business owner struggling to survive, last month’s federal budget won’t be a source of unbridled joy. The feedback Macks Advisory is getting from the sector is that support provisions don’t go far enough, incentives provide only temporary or limited relief, and if you’re operating a business with an aggregated turnover of less than $10m, you should be in close contact with your accountant to optimise budgetary opportunities.
For example, the budget’s instant asset write-off incentive allowing the full costs of eligible assets costing less than $20,000 in the next financial year, is a far cry from the generous temporary full expensing measure that expires at the end of this month.
Many business owners believe it’s now problematic to what extent the instant asset write-off incentive that helps small businesses buy small assets like computers, printers, and photocopiers, will benefit businesses needing significant capital assets.
Small and medium-sized businesses aiming to electrify operation to lower emissions and reduce costs can claim a maximum additional tax deduction of $20,000, but assets or upgrades to assets must first have been used or installed ready for use before 30 June2024.
While the expensing measure and write-off provision can both benefit profitable businesses by reducing taxable income, they’re useless to businesses struggling to break even. (The existing temporary full expensing scheme expiring at the end of this month that has allowed businesses to apply it to a broad range of assets, is essentially a boosted version of the asset write-off scheme that will now apply from 1 July. However, when a business acquired an asset as well as when the asset was first used or installed, determines which incentive is applicable – and that is why we suggest many small business operators could advantageously consult with their accountants on this issue before 30 June. But are there also any of the following matters you consider worth raising with your accountant?)
Storm clouds and silver linings
Storm clouds are gathering. From 1 July 2026 employers will have to pay employees’ superannuation entitlements on the same day they pay salaries and wages or suffer the consequences of non-compliance.
Contacts in the SME sector tell us this requirement of the budget is a looming nightmare.
But there are other new compliance requirements, mainly extensions of existing Australian Taxation Office (ATO) programs that can fairly be welcomed as silver linings.
One is the federal government’s decision to reduce the quantum of PAY and GST instalments. This will give cash flow support to small businesses eligible to use relevant instalment methods.
The budget has delivered compliance crackdown measures that are mainly extensions of existing ATO programs, the most relevant for small business owners being the $588.8m funding boost to the ATO’s
GST compliance regime, allowing it to develop new advanced tools to identify and address inadequacies in the current program.
The extended program will ensure businesses accurately report and remit GST as part of their tax obligations, also ensuring they don’t overclaim for GST refunds. Responsible taxpaying business owners who have in many instances seen their businesses suffer severely because competitors don’t fulfil tax obligations, welcome the government’s decision.
The ATO is done with leniency
The budget in effect puts on notice businesses with outstanding tax and superannuation liabilities, by providing the ATO with additional funding over the next four years to claw back debt after years of pandemic leniency.
The boost will, for example, fund pursuit of taxpayers with debts exceeding $100,000 and older than two years, that are either public and multinational groups with aggregated turnovers of more than $10m, or privately owned groups or individuals controlling more than $5m of wealth.
However, currently the ATO offers a seven-month amnesty waiving failure-to-lodge penalties associated with outstanding tax statements originally due between 1 December 2019 and 29 February last year.
While the amnesty appears narrowly focused, it’s nonetheless Macks Advisory’s view, based on a wealth of experience, that when the ATO offers any sort of amnesty of possible benefit to your business it’s wise to contact the office before the offer expires and tax officers contact you.
Our concern is that while undoubtedly measures to improve tax compliance will enhance government revenue, they don’t provide a basis for much-needed sustainable tax reform. We believe there’s an urgent need to review direct and indirect taxation to create a regime that encourages investment and economic growth. Band aid-type concessions and ad-hoc programs can never do that.
Easier travel on road ahead
However, in as much as time is money, small business owners welcome a budget that allows them more time to earn money than previously.
Instead of having to grapple monthly with the detail of various tax matters, they will, from the middle of next year be able to leave it to their accountants and tax agents to file multiple single touch payroll forms on their behalf.
From 1 July 2025 small businesses have been granted up to four years to amend income tax returns, thus reducing the burden of making so-called “revisions”. Concurrently the ATO will minimise the use of cheques which will ensure faster and easier tax refunds.
Among the brightest of silver linings in the 2023-2034 federal budget is a $392m provision for launching an Industry Growth Program, an initiative to help small businesses and startups commercialise concepts and expand operations. (Such businesses will need to focus on priority areas listed in the National Reconstruction Fund.)
All in all, it’s probably fair to say that while SMEs don’t see Treasurer Jim Chalmer’s recently presented budget as a source of unbridled joy, they’re prepared to give him a pass mark – with the qualification
that while he has made their road ahead in some ways easier to travel, the sooner comprehensive structural tax reform is accomplished, the sooner will a long game that encourages investment and sustained economic growth, be won.
In addition, given the current statue of the economic environment it may well be opportune that readers at this time also specifically consider reflecting on the following topics:
-Inflation
-Cashflow forecasting
-Working Capital requirements
-Management of bad debts & accounts receivables
To assist we provide a link to the Macks Advisory Website https://www.macksadvisory.com.au/ and utilise the search engine (located at the top RHS), where searching the above (and other) items will yield access to a number of timeless and relevant additional articles.
