After
a concerted look through the budget detail by the Carrazzo team, we provide the
main 2019 Budget announcements that affect your industry.
Not a lot to report, but there should be something for everyone we hope.
High wealth individuals – extra tax
scrutiny and audits
The racing industry isn't called the "Sport of Kings" for no good reason and
most serious players are generally high net wealth individuals.
In last night's budget the government announced that they will provide the
Australian Taxation Office (ATO) with $10
billion over four years to expand the ATO Avoidance Taskforce to 2023. The
focus of this task force is on multi nationals, big businesses (turnover greater
than $50m) and high wealth individuals.
Since 1 July 2016, the ATO has raised $12.9
billion in tax liabilities against large public groups, multinationals and
wealthy individuals and associated groups so an investment of $10 billion is sure
to see the number of audits and reviews for these entities significantly
increase.
The ATO has defined wealthy individuals as individuals, who are residents for
tax purposes and together with their business associates control net wealth of at least $5m . How do they get this
information? Tax Returns, government organisations, public information online
and the community.
Are your business and horse tax affairs in order? Is there a Business Plan to
support your horse 'business' status? The ATO are on the march, be warned..
Businesses benefits – increasing the
instant asset write-off to $30,000
Business can smile again as the Instant Asset Write-Off for small
businesses, which was first introduced in the 2016 Budget and recently
increased from $20,000 to $25,000 in January 2019 has been further increased to $30,000 until 30 June 2020 .
This is part of the government's policy to empower Australian businesses to
grow, invest and support a stronger economy.
If you are registered for GST, your
instant asset write-off threshold is $30,000 exclusive of any GST.
For example, if you bought 2 work utes to tow horse floats for $29,000 each
(exclusive of GST), each ute is under $30,000 and therefore eligible to be
fully written-off for tax purposes, i.e. a 100%
tax deduction in the year of purchase.
Eligible businesses include trading businesses with an aggregated turnover of less than $50m . Primary producers and
landowners can choose to apply special concessional rates or the Instant Asset
Write-Off (under the simplified depreciation). Special concessional rates for
primary producers and landowners include an outright deduction for water facilities
and landcare operations and a 10-year write-off for electricity connections and
telephone lines.
Please
Note : The Instant Asset Write-Off applies to depreciable
plant and equipment only. It does not apply to the purchase of breeding stock
in a business. It may, however, be applied to those who buy racehorses in an
eligible "Stand-Alone" racing business that has no associated breeding.
With all of the recent changes to this concession, this table assists in
establishing your entitlement.
Quick FAQ re instant asset write-off
If
I spend $30k on an eligible asset does it mean that I get $30k back at tax
time?
No. The business will be entitled to a tax deduction of $30,000. A
company with a tax rate of 27.5% would decrease their tax liability by $8,250
($30,000 x 27.5%)
Does
personal use of the asset affect eligibility?
Yes. If you purchased a work ute for $29k but used it personally 15% of
the time your Instant Asset Write-Off amount would be $24,650 ($29k x
(100%-15%)
What
happens to assets that cost more than $30,000?
When an asset is above the threshold ($30k), a small business will need
to allocate the asset to their general business pool. A medium sized business
(turnover above $10m but less than $50m) will need to depreciate the assets in
accordance with current depreciating asset rules.
Do
I get the tax deduction when I place the order for the asset?
No. The time of the tax deduction is when the asset is fully installed
and ready for use.
Luxury car tax
- extra refund relief for primary producers
Luxury car tax (LCT) is payable where
there is a taxable supply of a luxury car. LCT is additional to the normal GST
payable.
A Luxury car is a car whose value exceeds the luxury car tax threshold and does
not fall within any of the exemptions. This means that:
It must be a "car". For LCT purposes, this means a motor vehicle, i.e. a motor
powered "road vehicle" that includes a car that is:
designed to carry a load less than two tonnes and fewer than nine passengers.
This would include station wagons, four-wheel drive vehicles and some light
trucks, but not motor cycles or similar vehicles.
The ATO considers that whether a vehicle is a "road vehicle" depends on the
class of vehicle, not the actual use to which a particular vehicle may be put.
For 2018-2019, the LCT 'GST-inclusive' threshold was $75,526 for a fuel-efficient car and $66,331 for other vehicles.
GST registered primary
producers, which includes horse breeders, who acquire specified four-wheel
drive or all-wheel drive cars on which LCT has been paid at the 33% rate are
able to apply for a refund of 8/33rds of the LCT. This refund was limited to only $3,000 , but for vehicles acquired on or after 1 July 2019 , eligible
primary producers will be able to apply for a refund of any luxury car tax
paid, up to a maximum of $10,000 .
Please don't hesitate to contact the
writer if you wish for me to clarify or expand on any of the matters raised in
this article.
E-mail: paul.carrazzo@carrazzo.com.au
Web: www.carrazzo.com.au