There is a big gap between what politicians say and what is
happening 'on the ground.' It's like they're
playing with the map and we're driving on the roads. We are the
ones who experience the road blocks and the pot-holes, the
redirection, and changing traffic conditions. While a new road
might be announced to resolve some of the issues, you still have to
wait for it to be built. So, it is with the Federal Budget.
Here's what some of the road ahead looks like for
Since we're flogging the 'road' analogy, let's
call the ATO the police.
In the Budget speech, Treasurer Wayne Swan pointed out that tax
receipts are down $150bn since the GFC. Tax as a proportion of GDP
in 2011/2012 and the previous two years is the lowest it has been
As accountants, we are already seeing the implications of this
reduction in tax revenue in the approach and direction of the ATO.
The ATO's approach is much more aggressive,both in practical
ways and in policy decisions, than previous years where industry
insiders would joke about tax debt as being the "Rudd
If you have outstanding tax debt that is not being managed, fail
to lodge returns on time, receive large amounts of cash from
overseas, have dealings with related overseas entities, claim large
tax refunds, sell assets and claim the small business CGT
concessions, or operate well outside of industry benchmarks, you
are the equivalent of a P plater in a hotted up Nissan: a massive
target for the police. You might be squeaky clean but from the
ATO's perspective, you're worth a closer look.
In the Budget, the ATO received $378m in funding directed to
compliance programs including the extension of Project Wikenby
style inter agency investigations.
What all this means is that the ATO presence, like the police on
an Easter weekend, will be more visible than ever in your daily
Relieving cash congestion
Many of the upcoming reforms are designed to free up cash that
would ordinarily be sitting with the ATO. They are the equivalent
of someone suddenly opening a lane on a congested road. And with
more cash, comes the incentive to spend it, thus stimulating
Loss carry back scheme
Just prior to the Budget the Government announced a company loss
carry back scheme. If your company makes a tax loss next financial
year, this scheme will enable you to carry back that loss (up to
$1m) and claim it against tax you have paid this financial
Here's an example:
ABC Pty Ltd has been operating for a number of years and paid
tax of $75,000 in the 2012 income year (i.e., taxable income of
$250,000). The company had no carried forward tax losses at the end
of the 2012 year.
In the 2013 year the company makes a tax loss of $200,000
because of a significant investment in new plant and equipment and
weaker trading conditions. The company has a franking account
balance of $400,000.
The company's refund under the loss carry back rules is
limited to the lesser of the following (assuming a 30% tax
The tax value of the current year loss (i.e., 30% x $200,000 =
The tax value of the statutory cap (i.e., 30% x $1m
The franking account balance (i.e., $400,000); and
The tax paid in the carry back period (i.e., $75,000).
In this case, the company can carry back its full tax loss for
the 2013 year against the tax paid in the prior year and will
receive a cash refund of $60,000. This brings forward the cash flow
benefit of the losses rather than having to wait until the company
makes taxable profits in future years.
Last year, the Government announced two significant concessions
for small business that will enable your business, assuming it
qualifies, to claim an immediate deduction:
Motor vehicles – you can claim an instant tax
write-off for the first $5,000 for any motor vehicle that you buy
in the upcoming financial year (2012/2013).
Other assets – you can claim an immediate write-off
of all assets under $6,500 from 1 July 2012.
Plus, the Government has simplified how other forms of
write-offs are managed. The change will allow small business to
write-off other assets (except buildings) at a single rate
(normally multiple rates apply depending on the type of asset).
Talk to your Hayes Knight Adviser today and let them help you
navigate the road ahead!
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The income tax treatment of any property lease incentive will vary, depending on the nature of the inducement provided.
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