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.
Any reader intending to apply the information in this article to practical circumstances should independently verify their interpretation and the information’s applicability to their circumstances with an accountant or adviser specialising in this area.
End of release.
PAUL CARRAZZO CA & CARMEL FILIPPONE CA
CARRAZZO CONSULTING PTY LTD
801 Glenferrie Road, Hawthorn, VIC, 3122
TEL: (03) 9982 1000
FAX: (03) 9329 8355
MOB: 0417 549 347