The Rubiix 2018-9 Budget Report: Business Taxation

$20,000 instant asset write-off for SBEs extended by 12 months
The Government will extend the current instant asset write-off ($20,000 threshold) for small business entities (SBEs) by 12 months to 30 June 2019. This applies to businesses with aggregated annual turnover less than $10 million.
Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed into the general small business pool (the pool) and depreciated at 15% in the first income year and 30% each income year thereafter.

R&D tax incentive overhaul
The Government will amend the research and development (R&D) tax incentive in response to the
recommendations of the 2016 Review of the R&D Tax Incentive. The changes will apply for income years starting on or after 1 July 2018.
For companies with aggregated annual turnover below $20 million, the refundable R&D offset will be a
premium of 13.5 percentage points above a claimant’s company tax rate. Cash refunds from the refundable R&D tax offset will be capped at $4 million per annum.

Application of Div 7A to UPEs
The Government will clarify the operation of Div 7A of the ITAA 1936 to ensure that unpaid present entitlements (UPEs) come within the scope of Div 7A. A UPE arises where a related private company becomes entitled to a share of trust income as a beneficiary but has not been paid that amount.

Start date of other Div 7A measures deferred from 1 July 2018 to 1 July 2019.

Deductions disallowed for holding vacant land
The Government will disallow deductions for expenses associated with holding vacant land. Where the land is not genuinely held for the purpose of earning assessable income, expenses such as interest costs will be denied. It is hoped this measure will reduce the tax incentives for land banking which limit the use of land for housing or other development.
It will not apply to expenses associated with holding land that are incurred after:
a property has been constructed on the land, it has received approval to be occupied and available for rent; or
the land is being used by the owner to carry on a business, including a business of primary production.
Expenses for which deductions will be denied could be included in the cost base if it would ordinarily be a cost base element (ie borrowing costs and council rates) for CGT purposes.

If you wold like to discuss how any of these points may affect you, please contact our office on 03 9603 0066.