1. Changes to depreciation rules to SBEs

As part of the package to abolish the Minerals Resource Rent Tax (MRRT), from 1 January 2014,

  • the small business entities (SBEs) instant asset write-off threshold will be reduced from $6,500 to $1,000; and
  • the accelerated depreciation rules for SBEs will be removed. That is, SBEs can no longer claim the $5,000 immediate deduction for any motor vehicles purchased on or after 1 January 2014.

In addition, in respect of the SBE general small business pool, the current threshold of $6,500 for balance write-off purposes will be reduced to $1,000 from 1 July 2014.That is, if you have a general small business pool balance of less than $6,500, you can fully deduct the balance up to 30 June 2014.

2. Repeal the company loss carry-back measures

The company loss carry-back measures will be repealed together with the MRRT. Based on the Exposure Draft legislation released in November 2013, the repeal will take effect from 1 July 2013. This means:

  • loss carry-back rules will be available for tax losses in 2013 tax year only; and
  • the 2013 tax losses will only be able to be carried back one year.

3. Not proceeding with proposed FBT change

In respect of the Fringe Benefit Tax (FBT) changes proposed by the former Labor Government, Government has announced that it will not proceed with the proposal to remove the statutory formula method for salary-sacrificed and employer-provided cars.

4. Not proceeding with proposed self-education expense cap

The Government has clarified that it will not proceed with the former Labor Government’s proposal to put a $2,000 cap on self-education expense deductions. As the initial proposal was never actually law, the Government does not need to pass legislation to abolish the proposal.

5. Not proceeding with tax on pension earnings

On 6 November 2013, the Government announced that it will not be proceeding with the tax on pension earnings announced by the former Labor Government, which would tax a person’s pension account earnings above $100,000 in a draw-down phase.

6. Not proceeding with prohibition of off-market transfers from related parties

On 14 December 2013, the Government announced that it will not be proceeding with this measure, which was to prohibit off-market transfers of listed securities between a Self Managed Superannuation Fund (SMSF) and a related party and would have required all other related party transactions to be supported by a valuation from a suitable qualified independent valuer.

7. Changes to superannuation contribution rules

As part of the package to abolish the MRRT, from 1 July 2014, the Government will:

  • discontinue the low income superannuation contribution which refunds the tax paid, up to $500 a year, on superannuation concessional contributions for people with incomes up to $37,000; and
  • delay the progressive increase in the superannuation guarantee charge from 9% to 12% as:

Income year Previous rate – by Labor Proposed rate – by Coalition

2014 9.25% 9.25%

2015 9.50% 9.25%

2016 10.00% 9.25%

2017 10.50% 9.50%

2018 11.00% 10.00%

2019 11.50% 10.50%

2020 12.00% 11.00%

2021 12.00% 11.50%

2022 12.00% 12.00%

8. Other measurements

Other changes announced by the Government include:

  • to repeal the income support bonus and the schoolkids bonus from the date of assent of the legislation which repeals the MRRT;
  • to amend the private health insurance rebate rules and bring back the single rebate factor; and
  • to deny access to the Research and Development tax incentive for very large companies.

For any queries regarding the taxation aspects of the tax alert please contact Steve Fitzsimons here.

For any queries regarding the superannuation aspects of the tax alert please contact Garvin Jones here.