Here’s what the federal election could mean for your bottom line.
We’re just a few days from the Federal election and both main parties are pushing hard for the small business vote. So, how might the Federal election impact the taxes of small retailers? Here’s my guide to the key policies you need to know about.
As the incumbent, the Liberal approach is very much centred on a “steady as she goes” message, anchored on traditional Liberal values of sound economic management.
In practical terms, that translates into surprisingly few tax policy offerings specifically targeted at small business.
The key announcement – made in the Federal Budget back in early April – was the extension and enhancement of the instant asset write off. This was passed into law before the election was called, so whoever wins, this policy is set in stone.
Assets costing up to $30,000 can now be written off immediately (previously $20,000 up to 29 January 2019 then briefly increased to $25,000 for item acquired between 29 January 2019 and 2 April 2019; the new $30,000 limit applies to any qualifying asset purchase made after 2 April 2019). In addition, more businesses can make a claim; previously available only for businesses with an aggregate turnover of less than $10 million, that turnover threshold increased to $50 million from 2 April 2019.
Amongst the items retailers could look at claiming are the following:
- Cash registers and other POS devices
- Delivery vans
- Store fittings and fixtures
- Computers, laptops and tablets
- In store security systems
- Accounting software
As the challenger, Labor has to work harder to gain favour and to that end, they have produced a number of small business-friendly measures, plus a few that are less friendly.
The first place to start is with the instant asset write off, with the party declaring its support for the already announced (above) extension to the write-off.
In addition, Labor has announced a further scheme to allow accelerated write-offs for assets costing more than $20,000, which will be able to be written off at 20% per year (rather than over their effective life, which can be considerably longer). Those assets eligible for the upfront deduction include plant, machinery and equipment as well as lorries, vans, utes and trucks. Buildings and passenger motor vehicles would not be eligible.
To encourage jobs growth, particularly amongst young people and seniors, small businesses with a turnover of less than $10 million will be able to claim an additional 30% tax deduction on the salary paid for up to five employees who are:
- younger than 25 or older than 55, or a parent or a carer
- unemployed for three months or more
In a less welcome move, Labor has pledged to halve the capital gains tax discount for all assets purchased after 1 January 2020. This will reduce the capital gains tax discount for assets held longer than 12 months from 50% to 25%. All investments made prior to 1 January 2020 (for instance any business assets you already hold) will be fully protected from this measure.
Finally, Labor is also pledging to reintroduce the 2% debt relief levy that existed for several years under the Abbott government. This will effectively increase the top rate of tax to 49% for those earning more than $180,000.
Mark Chapman is tax communications director at H & R Block.