Budget 2018 - Cut the waffle.. Just the stuff Your Business needs to know

Ok...so there was a budget last night...but what will it mean for your business?

Like everything from Direction...let’s keep this brief, Easy to Understand and most importantly, without the political waffle.

We've taken the boring Budget reports, digested them and spat out just the info that's important to you as business owners.

As a business, there are some key things in the budget that will affect you, and some great strategies to implement.

1. Tax Cuts: These come in the form of changes to the tax brackets, as well as the Low and Middle Income Tax Offset (LMTO).

From 1 July 19 If you earn between $87K-90K you will drop from 37% to 32.5% bracket. The Budget also highlighted a gradual abolishment of the 37% bracket for those earning up to $200K by 2025 [just around the corner right? ;-) ]

Rather than a change in the tax deducted week to week, the LMTO is an offset. This means when you lodge your tax return, an offset will be calculated on your income and form part of your tax assessment (either as an additional refund or reducing any tax payable. The offset isn’t available this coming year, but will be available when you do your 2019 tax and onwards.

Business Tip: If you have a Corporate or Trust structure it will be important to review the way your income is distributed. Decisions based around Wages vs Dividends, Wages to associates ie eg spouse will be critical. Annual Tax Planning will become non negotiable from 2019 onwards.

2. Division 7A issues with Trusts - If you have a Trust structure and a beneficiary that is a related company, chances are you have this issue. It’s not a new issue, having been a hot topic since 2009, however the government are now stating in the budget that from 1 July 2018, these “Unpaid Present Entitlements” will be brought fully within the rules companies have had to deal with since 1997.

Business Tip: We will have to watch how these amendments pan out, however early discussion and planning will be critical.

3. The $20,000 instant asset write-off will stay in place for another 12 months, now ending 30 June 2019. This is a great tax planning tool for growing small businesses.

Business Tip: Don’t believe the smoke and mirrors hype. The instant write off is not a cash bonus to you. It is simply a timing difference on your claim, accelerated depreciation if you like. You see, normally you would write off your asset say at 30% per year. All the write off does is give you 100% in year one and then Zip, Zero, Nothing in future years. Don’t be fooled by the likes of Harvey Norman and the Car Dealerships...if you don’t need it, don’t buy it. If you can’t afford it, definitely don’t buy it.

4. Ongoing Cash Economy focus: The old chestnut continues to be wheeled out, with the ATO getting an additional $318.5M in new funding over 4 years to combat the “black economy”. From 1 July 2019, it will be illegal to accept cash payments as a business of more than $10,000. In addition the Reportable Payments system, currently in place for building and construction industries, will be extended to the cleaning and courier industries starting 1 July, and will now also include security and investigation providers, road freight and computer system design industries.

Business Tip: Any of the industries new to this regime should ensure they have an accounting software that will capture this information to make the reporting process efficient and smooth.

5. Industries to watch: Major announcements regarding Road and Rail infrastructure as well as Aged Care/NDIS related services mean that businesses in these industries should review their business strategy. Some significant opportunities or threats may exist.

Business Tip: If your business services the above, conduct a strategic planning day to review the impact on your business and the opportunities that the budget announcements may offer. Areas to focus on are Government Tenders, refocus of core activities, planned staffing capacity and financing business growth.

And that’s about it....Overall not a massive impact of new initiatives regarding business but some key reasons to meet with your advisor and start planning now.

As always, the Team at Direction are ready to help make running your business easier. None of the above is specific advice for your situation, so reach out to us with any questions before putting any plans into place.