Small business owners have been left in limbo, with almost 100 tax changes announced by the Coalition and former Labor government left unlegislated.
Cash flow problems are common among small business and the raft of changes which are yet to be enacted are making it difficult for them to plan for the future.
EY has compiled a list of the unlegislated changes for its clients to help manage the confusion, with the global accounting firm identifying a total of 95 potential changes.
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EY tax partner Alf Capito told SmartCompany the uncertainty hasn’t ground business to a halt, but it is reducing investment and spending.
“The economy is still jigging along, but when you have close to 100 measures unlegislated, each one impacts a small proportion of the tax paying community, potentially in a significant way,” he says.
“If you’re looking to buy an asset, but don’t know if you’ll get the instant tax write off or not, you wait to buy it until it becomes clear. So it’s hampering investment and potentially creating a position where jobs aren’t being created.”
Capito says measures such as the Carbon Tax and the Minerals Resources Rent Tax repeal can have a big impact upon the business environment, but largely it’s the “plethora” of un-enacted measures which is destructive.
“Each measure in itself isn’t critical… but it’s just the plethora of measures which demonstrate the Labor government let this get out of control,” he says.
“I sense the new government is determined to deal with these issues, but the difficulty will be finding the resources to get these issues resolved when it’s taking a tough line on public service cuts.”
Possible tax changes which will impact small business include the removal of the carbon tax, an instant deduction of $5,000 for motor vehicles acquired by small business and the repeal of the loss carry-back measures.
Just three days before the end of financial year, parliament passed the loss carry-back measure, but under the Coalition government this is on the table for repeal.
A repeal of this measure will mean around 110,000 Australian businesses will no longer benefit from the tax break which sees them being able to “carry back” their losses to offset past profits and receive a tax refund.
The Coalition has also pledged to delay the super guarantee increase by two years, effectively putting the rate of compulsory super contribution on hold at 9.25% for the next two years, should the change be enacted.
Other unlegislated changes include the removal of the instant write off for assets valued under $6,500, the closure of the Clean Energy Finance Corporation and the changing of the corporate tax rate to 28.5% for businesses making over $5 million in income who will pay a levy of 1.5% for Paid Parental Leave.
The Liberal Party has also said it will defer a Labor government measure which saw businesses unable to claim a tax deduction for interest on money borrowed for an overseas expansion.
Capito says tax advisors must inform their clients of the current government’s intentions, but ultimately business decisions are left to the business owner.
“We’re telling them to plan for the worst so to speak, that’s the prudent advisors advice,” he says.
“The client will be reluctant to do anything other than this. They often defer decisions until there is more certainty, but this creates a constant deferral of activity.”