Extension of $20,000 instant asset write-off and CGT changes sit dormant in Parliament, causing “angst” for SMEs

Two key pieces of SME-specific legislation have failed to be put to the Senate for debate after numerous parliamentary sitting weeks, despite both having near-assured bipartisan support, causing growing concern from accountants and business leaders.

The two pieces of legislation are both Treasury Law Amendments, and both seek to change tax schemes and benefits for SMEs. The first bill — Accelerated Depreciation for Small Business Entities — seeks to extend the highly popular $20,000 instant asset write off for another 12 months to June 30, 2019.

The second Bill — Tax Integrity and Other Measures — relates to to capital gains tax (CGT) concessions for SME owners seeking to sell their business, legislating a change where not only would business owners have to pass a $6 million net asset value test, but so would the business being sold. These changes led to a furore earlier this year, as numerous businesses would have been left with unexpected and significant tax bills after the legislation was proposed to be enacted

Both pieces of legislation are largely considered to be uncontroversial, especially the one relating to the $20,000 instant asset write-off, which has been extended each year without a problem since 2015.

And while the CGT concessions modifications were controversial and widely opposed by tax professionals when first introduced, that opposition was mainly thanks to the retrospective enactment date, which has since been nixed via amendments to the bill.

Neither piece of legislation is scheduled to be debated this sitting week. Parliament is due to break again on August 24 and won’t return again until September 9.

Uncertainty causing “angst” among SMEs

Speaking to SmartCompany, Tony Greco, the general manager of technical policy at the Institute of Public Accountants (IPA), says a number of key pieces of tax legislation have become casualties of a “backed-up” Parliament, thanks to a number of other big-ticket issues halting debate.

It’s safe to say that the government is somewhat distracted, with Prime Minister Malcolm Turnbull attempting to stem a potential leadership challenge, negotiating on the Coalition’s flagship National Energy Guarantee (NEG), and attempting to pass the final stage of the government’s company tax cuts through the Senate.

Turnbull announced this morning the NEG would have no legislated emissions target, and is reportedly preparing to ditch legislation on tax cuts for big business after acknowledging the plan is highly unpopular with voters.

Greco says there are a number of tax changes with minimal opposition sitting in this “backlog”, and numerous small business owners and accountants are unhappy with the level of certainty being provided.

“A lot of these bills have retrospective start dates, but it is still causing a lot of angst for people trying to comply with the law,” he says.

Paul Drum, head of policy at CPA Australia, also warns accountants and SMEs away from making any hard and fast decisions on either piece of legislation, specifically when it comes to the $20,000 instant asset write-off.

“While it seems likely that the Bill will pass Parliament in the next few months, there is still some uncertainty for depreciable assets being acquired now by small business entities and tax professionals may wish to exercise caution when giving advice on the subject,” Drum tells SmartCompany.

Tax cuts also in the open

However, there’s also another piece of legislation that is yet to pass the Senate that is causing serious headaches for SMEs, says Greco. The legislation relates to the previously legislated small to medium business tax cuts. It specifies the eligibility for the new 27.5% corporate tax rate, which would not apply to businesses where more than 80% of its assessable income is income of a passive nature.

This legislation is set to be debated in the Senate today, but Greco notes it has a retrospective application date of July 1, 2017, meaning businesses that could be affected by the potential legislation have been unable to file their 2017-18 tax return. This can also have flow-on effects for companies’ distributions to shareholders and franking implications.

“It’s very unsatisfactory that these businesses can’t go forward with certainty. We need to know what the rules of the day are, and the more things get delayed, the more angst it causes,” he says.

SmartCompany contacted Small Business Minister Craig Laundy, but was informed by a spokesperson that this is an issue for Treasury. SmartCompany contacted Treasury but did not receive a response prior to publication.

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