Tens of thousands of small businesses which took advantage of tax breaks associated with the mining tax will have to pay back that money to the Australian Tax Office and face further red tape, after the federal government announced it would retrospectively date the abolition of the measures.
After the mining tax was scrapped last week, Treasurer Joe Hockey and Finance Minister Mathias Cormann yesterday declared five tax breaks linked to the mining tax would be back-dated, including the company loss carry-back measure, which will retrospectively apply from July 1, 2013.
Any business that has claimed the loss carry-back in its 2013-14 return will have to amend its tax assessment.
The ATO said in a statement companies will not be subject to penalties and interest if payments are made within a reasonable time.
The government said it consulted with the ATO on the matter and the move to back-date would stop the loss of $1 billion from the budget.
Other back-dates include:
- Abolition of the mining tax from 1 October 2014 (with taxpayers final Minerals Resource Rent Tax year (even if it is a part year) ending on 30 September 2014);
- Reduction of the instant asset write-off from 1 January 2014;
- Abolition of accelerated depreciation for motor vehicles from 1 January 2014; and
- Abolition of geothermal energy concessions from 1 July 2014.
The instant asset write-off will be reduced from $6500 to $1000.
The dates are the same as those proposed in the original repeal bill, which was defeated in the Senate in July.
A spokesperson for the Finance Minister’s office told SmartCompany these dates were consistent with election promises and dates announced in November last year at the time of the introduction of the first mining tax repeal bill.
Small Business Minister Bruce Billson told SmartCompany the government had been clear and upfront about the tax arrangements and repeal dates throughout delivering its election promise of repealing the miming tax.
“It’s long been known and understood that the repealed measures don’t have the revenue to support them,” says Billson.
Billson, who was visiting China when the tax was repealed, says there are many tax measures he would like support for small business, but such measures needed to be able to be funded.
“That’s simply the reality,” he said.
Head of tax with Taxpayers Australia, Mark Chapman, criticised the new measures, saying as the mining tax itself was not abolished until October 1, 2014 the government appears to be on a “tax grab from small businesses”.
Peter Strong, executive director of the Council of Small Business of Australia, told SmartCompany the action shows a complete lack of understanding of the small business sector by the government.
“It’s unbelievable that anybody would show such arrogance and such lack of respect for small business,” says Strong.
He anticipates anywhere from 10,000 to 40,000 small businesses will be affected by the move.
The spokesperson for the Minister for Finance told SmartCompany COSBOA and Strong were disappointed they “didn’t get what they want”.
“But what they want would have cost the government $1 billion,” says Cormann’s spokesperson.
Strong responded by saying, “You don’t change tax laws half way through a financial year.”
“[The loss carry-back] was back-dated before the election, so what they’re saying is, small business should have to predict the election.”
“They expect small businesses to go onto the Treasury website daily to monitor repeals. They are expecting small business to act like big business.”
Strong says he spoke to one small business owner yesterday who has bought his daughter a car through the tax breaks and would now be stung by repaying the concession.
“What it shows is that Joe [Hockey] has not moved on since he was last in power. He showed no time for small business, he’s a man for the big end of town and this proves it.”