Business tax updates
$10,000 limit on cash payments to business
One of the interesting approaches to tackling the black economy in the recent 2018-19 Federal Budget was the announcement of a $10,000 limit on cash payments to business.
Unrecorded and untaxed transactions that occur in the community are estimated at up to 3% of GDP or around $50 billion. We have all seen examples of the black economy in action in the form of cash payments and money not ringing through a retailer’s till. This initiative targets high value transactions that are generally used to avoid tax obligations or for laundering the proceeds of a crime.
How will the new rules work?
The cash payment limit targets larger cash payments – typically made for cars, yachts and other luxury goods, agriculture crops, houses, building renovations and commodities – removing the ability of any individual or business to make a single cash transaction of $10,000 or more.
The limit would apply to all payments made to businesses with an ABN for goods or services. The impending restrictions would not apply to private sales where the seller does not have an ABN, or cash payments to financial institutions.
Transactions at or in excess of the $10,000 threshold would need to be made electronically or by cheque. Splitting the payment into smaller amounts either as cash payments or a combination of cash and electronic payments would not be allowed. There would also be restrictions to prevent payment structuring to get around the payment limit.
At present, only financial services, banks and gambling industries have obligations for cash transactions of $10,000 or more. Under the Anti-Money Laundering and Counter-Terrorism Financing rules, transactions of $10,000 or more must be reported to the Australian Transaction Reports and Analysis Centre (AUSTRAC) within 10 working days.
Australia will not be the first country to introduce cash payment limits; France, Spain and Italy all impose limits at varying levels and generally for much smaller amounts than $10,000. For example, France imposes a EUR 1,000 limit for goods and EUR 450 for certain services. There are some exemptions for non-residents, salaries paid in cash, and for those who do not have access to any other form of payment.
The Australian limit on cash transactions is intended to apply from 1 July 2019. The legislation enabling the measure is currently in consultation phase and is not yet law. We will keep you up to date on progress.
$20,000 accelerated deductions for small business extended another year
The ability for small business entities to claim an immediate deduction for assets costing less than $20,000 has been extended for another 12 months until 30 June 2019.
From 1 July 2019, the immediate deduction threshold will reduce back to $1,000.
There are no limits to the number of times you can use the immediate deduction assuming your cashflow supports the purchases.
If your business is registered for GST, the cost of the asset needs to be less than $20,000 after the GST credits that can be claimed by the business have been subtracted from the purchase price. If your business is not registered for GST, it is the GST inclusive amount.
Second hand goods are also deductible. However, there are a number of assets that don’t qualify for the instant asset write-off as they have their own set of rules. These include horticultural plants, capital works (building construction costs etc.), assets leased to another party on a depreciating asset lease, etc.
If you purchase assets costing $20,000 or more, the immediate deduction does not apply but small businesses have the ability to allocate the purchase to a pool and depreciate the pool at a rate of 15% in the first year and 30% for each year thereafter.