Taxable payments reporting system to be extended

The Government will extend the taxable payments reporting system (TPRS) to the following industries from 1 July 2019:

  • security providers and investigation services;
  • road freight transport; and
  • computer system design and related services.

The requirements already apply to the building and construction industry. As previously announced the requirements have been extended, from 1 July 2018, to the cleaning and courier industries.

Tax deduction to be denied for non-compliant PAYG and contractor payments

Measures will be introduced from 1 July 2019 to ensure taxpayers will be unable to claim deductions for payments to employees, such as wages, where they have not withheld PAYG from these payments, despite the PAYG withholding requirements applying.

It is also intended to remove deductions for payments made by businesses to contractors where the contractor does not provide an ABN and the business does not withhold any amount of PAYG.

Deductions disallowed for holding vacant land

The Government will disallow deductions for expenses associated with holding vacant land from 1 July 2019. Where the land is not genuinely held for the purpose of earning assessable income, expenses such as interest costs will be denied.

The measure will apply to both land held for residential and commercial purposes. However, the "carrying on a business" test would generally exclude land held for a commercial 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.

Disallowed deductions will not be able to be carried forward for use in later income years. Expenses for which deductions will be denied could be included in the cost base if it would ordinarily be a cost base element for CGT purposes. However, if the denied deductions are for expenses that would not ordinarily be a cost base element, they cannot be included in the cost base.

Cash payments limit: payments made to businesses

The Government will introduce a limit of $10,000 for cash payments made to businesses for goods and services from 1 July 2019.

This measure will require transactions over the threshold to be made through an electronic payment system or by cheque. The rules will not apply to transactions with:

  • financial institutions; or
  • consumer-to-consumer non-business transactions.

Application of Division 7A to UPEs

The Government has announced that it will clarify the operation of Div 7A of the ITAA 1936 to ensure that unpaid present entitlements (UPEs) fall within the scope of Div 7A from 1 July 2019. A UPE arises where a related private company becomes entitled to a share of trust income as a beneficiary but has not been paid the amount. Division 7A requires benefits provided by private companies to related taxpayers to be taxed as dividends unless they are structured as Div 7A complying loans or another exception applies.

R&D tax incentive changes

The Government has announced it will amend the research and development (R&D) tax incentive with changes to apply from 1 July 2018.

For companies with aggregated annual turnover below $20 million:

  • Refundable R&D offset will be a premium of 13.5 percentage points above the claimant's company tax rate
  • cash refunds from the refundable R&D tax offset capped at $4 million per annum
  • R&D tax offsets that cannot be refunded will be carried forward as non-refundable tax offsets to future income years.

For companies with aggregated annual turnover of $20 million or more:

  • The marginal R&D premium will be the claimant's company tax rate plus:
  • 4 percentage points for R&D expenditure between 0% to 2% of overall expenditure;
  • 5 percentage points for R&D expenditure above 2% to 5% of overall expenditure;
  • 9 percentage points for R&D expenditure above 5% to 10% of overall expenditure; and
  • 5 percentage points for R&D expenditure above 10% of overall expenditure.

The R&D expenditure threshold - the maximum amount of R&D expenditure eligible for concessional R&D tax offsets - will be increased from $100 million to $150 million per annum.

Small business entities

$20,000 instant asset write-off 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.

The threshold amount was due to return to $1,000 on 1 July 2018. As a result of this announcement, SBEs will be able to immediately deduct purchases of eligible depreciating assets costing less than $20,000 that are acquired between 1 July 2018 and 30 June 2019 and first used or installed ready for use by 30 June 2019 for a taxable purpose.

Assets valued at $20,000 or more, which cannot be immediately deducted, can continue to be placed into the general small business pool and depreciated at 15% in the first income year and 30% each income year thereafter. The small business pool can also be immediately deducted if the balance is less than $20,000 over this period.

The instant asset write-off threshold and the threshold for immediate deductibility of the balance of the pool will revert to $1,000 on 1 July 2019

Additional funding for Single Touch Payroll to assist small businesses

The Government will provide an additional $15 million over 3 years from the 2018-19 income year to the ATO to support the modernisation of payroll and superannuation fund reporting. The funding will be used to support small businesses with fewer than 20 employees during the transition to Single Touch Payroll Reporting from 1 July 2019