Never Ending Story - more tax changes from 1 January

Written on the 8 November 2013

Normally we wouldn’t advise you of potential tax changes until we were absolutely certain that they were going to happen. But this potential tax change is a bit different because if the change goes ahead, your decisions pre and post 1 January could mean several thousand dollars. 

Late last month the Government released draft legislation repealing the Minerals Resource Rent Tax - or mining tax as most of us know it.  While the repeal of the mining tax is not likely to have a direct application to many small business and individual taxpayers, the Government also plans to abolish a number of other tax measures that will have a broader impact.

The changes are not certain until they are passed by Parliament but there appears to be limited opposition to the repeal of the mining tax and the other associated tax measures.  Here’s what will change if and when the measures are repealed:

Immediate deductions reduced for small business entities (SBEs)

Currently, small business entities (generally entities with a turnover of less than $2m) can claim an immediate deduction for depreciating assets costing less than $6,500.  For example, if a SBE buys a $4,000 computer, the business can claim an immediate deduction in the same financial year for the full $4,000.  From 1 January 2014 however, this threshold will drop to $1,000.  So, if there are assets you need for your business and cash flow allows, you have until 31 December 2013 to buy the assets you need and use them or install them ready for use.

$5,000 deduction for motor vehicles scrapped

Thinking of buying a motor vehicle for your small business? From 1 January 2014, the $5,000 immediate deduction for motor vehicles purchased by small business entities will be removed.  Once again, if you are thinking of buying a motor vehicle for your business, you have until 31 December 2013 if you want to claim the $5,000 immediate deduction.

Loss carry-back measures

The loss carry-back measures were only recently introduced and enable companies to offset tax they have paid in previous years against current year losses.  The repeal of this measure however means that companies will only be able to use the loss carry-back measures for the 2013 income year. The rules will be repealed from the start of the 2014 income year.  Companies that are late lodging their 2013 tax returns will still be able to utilise the loss carry-back rules for the 2013 income year.

Superannuation guarantee increase slowed

As you know, the superannuation guarantee (SG) percentage was due to increase gradually from 1 July 2013 until July 2019 when the rate reaches 12%.  The new measures slow the increase.  The SG percentage will be kept at 9.25% for the 2014, 2015 and 2016 financial years. From 1 July 2016, the SG percentage will then rise to 9.5% and then increase by half a percentage point each year until it reaches 12% for years starting on or after 1 July 2021.

Low income super contribution

The Government plans to remove the rules that currently allow the contributions tax paid on concessional contributions for individuals earning up to $37,000 to be returned. The changes will apply to concessional contributions for financial years starting on or after 1 July 2013.

Income support bonus (ISB)

The Government will remove the ISB which is currently paid twice a year to certain social security recipients. The next instalment of the payment is due to be paid to recipients in March 2014 unless the rules are repealed by then.

Schoolkids bonus (SKB)

This tax-free bonus payment will also be removed. The next instalment of the SKB would be in respect of the “test day” occurring on 1 January 2014 unless the rules are repealed by then.

Geothermal energy exploration deductions

Expenditure incurred after 30 June 2014 on geothermal energy exploration and prospecting will no longer be immediately deductible.