Tax Law Changes Affecting Business

Tax Law Changes That Are Affecting Business - 9 November 2017

Tax Law Changes Affecting Business

New Rules For Accessing The 27.5% Company Tax Rate From 1 July 2017

The Treasury Laws Amendment (Enterprise Tax Plan Base Rate Entities) Bill 2017 was introduced into the House of Representatives on 18 October 2017.

This Bill amends the Income Tax Rates Act 1986 (Cth) to ensure that from the 2017-18 income year, a company will only qualify for the lower company tax rate for an income year if:

  • no more than 80% of the company’s assessable income for that income year is “base rate entity passive income”; and
  • the company’s aggregated turnover for the income year is less than the aggregated turnover threshold for that income year (for the 2017-18 income year, the threshold is less than $25 million).

These amendments will modify the requirements that must be satisfied for a company to qualify as a “base rate entity” by replacing the “carrying on a business” test with a passive income test. Under the passive income test, companies that are generating predominantly passive income (e.g. interest, rent, royalties etc.) will not be eligible for the lower company tax rate.

The purpose of this legislation is to ensure that passive investment companies cannot access the lower company tax rate that is otherwise available to small businesses. Currently, to qualify as a “base rate entity” to apply the lower 27.5% company tax rate, a company must be “carrying on a business” as well as meet the relevant aggregated turnover threshold.

The Bill will apply prospectively from the 2017-18 income year.

“Base rate entity passive income” is assessable income that is:

  • a distribution that is not a ‘non-portfolio dividend’;
  • franking credits attached to such a distribution;
  • interest income;
  • a royalty;
  • rent; and
  • a net capital gain.

Streamlined Reporting With Single Touch Payroll

Single Touch Payroll means employers will report payments such as salaries and wages, PAYG withholding and super information to the ATO directly from their payroll solution at the same time they pay their employees.

For employers with 20 or more employees, Single Touch Payroll reporting starts from 1 July 2018. The first year will be a transition and penalties will not apply.

The Government has also announced that it will expand Single Touch Payroll to include employers with 19 or less employees from 1 July 2019. This will be subject to legislation being passed in Parliament.

Therefore, if your business has 20 or more employees, Single Touch Payroll starts for you on 1 July 2018. If you have less than 20 employees, Single Touch Payroll will start for you on 1 July 2019 if the relevant legislation gets passed.

Superannuation Guarantee – New Measures Announced

The Government has announced a further package of reforms to give the ATO near real-time visibility over superannuation guarantee (SG) compliance by employers. The Government will provide the ATO with additional funding for a Superannuation Guarantee Taskforce to crackdown on employer non-compliance. The package builds on legislation already announced to close a legal loophole used by unscrupulous employers to short-change employees who make salary-sacrifice contributions to their superannuation.

The package includes measures to:

  • require superannuation funds to report contributions received more frequently, at least monthly, to the ATO. This will enable the ATO to identify non-compliance and take prompt action;
  • update payroll reporting through the rollout of Single Touch Payroll (STP). This will reduce the regulatory burden on business and transform compliance by aligning payroll functions with regular reporting of taxation and superannuation obligations;
  • improve the effectiveness of the ATO’s recovery powers, including strengthening director penalty notices and use of security bonds for high-risk employers, to ensure that unpaid superannuation is better collected by the ATO and paid to employees’ super accounts; and
  • give the ATO the ability to seek court-ordered penalties in the most egregious cases of non-payment, including employers who are repeatedly caught but fail to pay superannuation guarantee liabilities.

Reduction Of Wine Equalisation Tax (WET) Rebate Cap

In the 2016-17 Budget, the Government announced that it will address integrity concerns with the wine equalisation tax (WET) rebate by reducing the WET rebate cap and tightening eligibility criteria. 

The scheduled changes include: 

  • strengthening the associated producer provisions, so that from 1 October 2017 the associated producer test applies at any time during the financial year;
  • reducing the WET rebate cap from $500,000 to $350,000 on 1 July 2018;
  • introducing tightened eligibility criteria for the producer rebate from 1 July 2018 with some transitional arrangements from 1 January 2018; and
  • creating a stronger link between rebate claims and the payment of WET by limiting entitlements to WET credits and changes to the quoting rules from 1 July 2018.

The changes were passed into legislation in August 2017.

9 November 2017

Disclaimer: The information on this page is for general information purposes only and is not specific to any particular person or situation. There are many factors that may affect your particular circumstances. We advise that you contact Mathews Tax Lawyers before making any decisions.

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