In case you missed it in the Budget 2018-19...make sure that your wages bill is tax deductable

The Federal Budget contained a number of business tax initiatives, some beneficial and some with a potential sting.

The good news

On the benefit side the instant asset write-off for small capital items has been extended. Small business entities (SBEs) with aggregated annual turnover of less than $10 million will be entitled to claim as deductions capital purchases not exceeding $20,000 for a further 12 months until 30 June 2019.

SBEs that have the cash flow to make these equipment purchases will benefit from a lower tax bill in the year they make the purchase.

The bad news

A potentially costly amendment for businesses that use small contractors, is a provision aimed at cutting down the cash economy. The proposed provision will put the onus on businesses to make sure that all subcontractors provide an ABN. If passed into law, tax deductions for contractors' payments may be denied unless the business has withheld PAYG from the payment when a contractor fails to provide an ABN.

Deductions will also be denied for wages if businesses do not withhold and remit PAYG when there has been a requirement to do so. This is an added burden on a business over and above the existing penalties for not properly accounting for PAYG, effectively using good businesses to police the cash in hand contractors.

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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