Several proposed legislative changes from the 2010 budget will have an impact on small businesses. Proposed changes are expected to come into effect on 1 July 2010.
Restructuring the Margin Scheme Provisions
The government will amend the margin scheme provisions placing the focus on the main provisions, clarifying the exceptions and removing an anomaly that allows an approved valuation of land to be used to calculate the margin on subdivided land. These amendments will restructure and clarify the rules for selling property as part of a business.
Tax Credits
The financial supply provisions of the GST law will be amended to reduce administrative costs and make the procedures for operating the legislation more functional. The proposed amendments include increasing the threshold at which businesses need to engage with the financial supply provisions from A$50 000 to A$150 000 of input tax credits.
The range of expenses qualifying for a reduced income tax credit (RITC) will be expanded to include acquisitions with regard to life insurance by superannuation funds, lenders’ mortgage insurance and reinsurance, and transactional fraud monitoring services. The current RITC rate of 75% will remain unchanged.
There is also a proposed amendment allowing RITCs for trustee and responsible entity services to be adjusted. The government states that this change will allow for more ATO revenue. This is to be used on administrative and regulatory expenses.
Also, a technical amendment will clarify language between various concepts, including guarantees and indemnities.
Focus on Compliance
The ATO will receive A$107.9m over four years to address the unfair competitive advantage that some businesses derive by operating in the cash economy. The funds will be used to increase the visibility of the ATO.
The ATO Focuses on the Cash Economy
There will be an increase of cross-matching procedures so the ATO can track more businesses that are dealing in the cash economy. This includes the Merchant Bank Cards Project, which will match data between banks and 300 000 individuals; the Plasterers Project, which collects data of taxpayers that have purchased plasterboard – expected to cover 10 000 cases; the Motor Vehicle Data Matching Project, which will target individuals purchasing vehicles over A$10 000 and match data with relevant road traffic authorities; the Banking Transparency Strategy, collecting intelligence on Australians with offshore accounts; and the Industry Benchmarks initiative, which will use industry snapshots based on what the ATO thinks is happening in a particular industry to compare to business turnover.
Input Tax Credits Upfront with Regards to Hire Purchase Arrangements
Under the proposed amendments, the treatment of hire purchase agreements will be changed to reflect the simplicity that the government is trying to achieve. All hire purchase arrangements will be treated as fully taxable supplies. Taxpayers will not have to continue splitting the supply into taxable segments and segments covered by hire purchase agreements. This will also remove the need to apportion input tax credits on acquisitions related to these supplies. The rules covering hire purchase agreements will be made the same for cash and non-cash GST taxpayers.