The much-awaited Federal Budget 2012-13 was announced by treasurer Wayne Swan last night – and there’s not a lot to get excited by. Despite forewarning of the need to make significant ‘savings’ in this budget in order to deliver a promised surplus, the Federal Government has budgeted a net increase in expenditure of $201 million and has relied heavily on forecast revenues from the Mineral Resources Rental Tax (MRRT) and Carbon Tax in order to deliver a slim surplus in 2012-13 of $1.5 billion.
So what does it mean for you as a business owner?
Company tax unchanged – promised cut to 29% has been scrapped
The Federal Labor Government had previously promised that revenues from the MRRT would help spread some of the benefits of Australia’s natural resources to the rest of the business community in the form of a 1% reduction in corporate tax. This has been scrapped, and the additional taxes are being directed to a slew of welfare initiatives for the lowest income earners in Australia, plus a seismic shift in the tax-free threshold from $6,000 to $18,200.
Businesses will be able to ‘carry back’ losses for 1 year during 2012-13, and for 2 years thereafter
Whereas previously businesses could only ‘carry forward’ losses to offset future profits, you will now be able to carry back losses against the previous years’ profits and claim a refund of taxes paid, up to a maximum of $1 million losses / $300,000 refund. In 2013-14 this is intended to extend to carrying back against the past 2 years (if the Government of the day doesn’t rollback the legislation).
Increase asset purchase writeoff threshold to $6,500
From 1 July 2012, any business asset purchase up to $6,500 can be fully written off during the year of purchase. And from fiscal year 2013, a $5,000 rebate will be applicable on the purchase of new and used cars.
$1.1 billion of local Government grants pulled forward from 2012-13 to the current financial year
In order to help squeeze into surplus on paper for FY2012-13, the Government has decided to pay out already-scheduled grants to local Governments earlier than anticipated, with the effect of increasing this year’s budget deficit even further to a staggering $44 billion – but it wipes $1.1 billion off next year’s expenditure.
Changes to treatment of bad debts between ‘related parties’
This measure will deny a tax deduction for a bad debt written off, where the debtor is a related party even though not in the same tax consolidated group. The corresponding gain to the debtor will also not be taxed.
Limiting the Commissioner of Taxation’s ability to backdate GST registrations
Where previously the Commission of Taxation could backdate GST registrations indefinitely, a statutory limitation of 4 years will now apply. This means that if you wanted to apply for a backdated GST registration and claim back GST paid on supplies more than 4 years prior to 1st July 2012, you only have 6 weeks in which to address this.
Removal of Capital Gains Tax discount for non-residents
The Government will remove the 50% CGT discount for non-residents on capital gains accrued after 7:30pm (AEST) on 8 May 2012. The CGT discount is still available for gains accrued prior to this time WHERE non-residents choose to obtain a market valuation of assets as at 8 May 2012.
‘Golden handshakes’ only tax free up to total income of $180,000
Where departing executives have often received lucrative payouts on their departure, their Eligible Termination Payment (ETP) will now only be tax exempt insofar as it doesn’t take their annual income above $180,000.
The other major element of the budget which is creating a stir is the increase in personal income tax marginal rates – the 15% tax bracket has now been increased to 19% (income between $18,200 and $37,000) and income between $37,000 – $84,000 will be taxed at 32.5% instead of 30%.
In conclusion, this budget doesn’t appear to do much for the overall state of the economy and is likely to dip into many people’s pockets. However, there are a few minor opportunities that businesses should assess the eligibility for and make the most of in the short term. Anything promised more than a year down the track may not still be there when that date rolls around – and if, as expected, the Federal Labor Government loses in a landslide to the Liberals at next year’s election we can expect that the incoming Government will be making some radical changes (starting with the rollback of the Carbon Tax).