Mining tax repeal means cuts to small business tax measures

The so-called 'Mining Tax' has been all but repealed after the Senate passed measures to abolish the tax yesterday.

The Government struck a deal with the Palmer United Party to repeal the tax in return for a further pause to compulsory superannuation increases, along with an extension of the low income superannuation contribution measure until 30th June 2017, retaining the schoolkids bonus until 31st December 2016 (now means tested) and also keeping the income support bonus until the same date.

The change to compulsory superannuation contributions sees the current rate of 9.5% retained until 1st July 2021, from when it will increase annually until it reaches 12%. Unfortunately this once again signals a concerning trend from the Government in continuing to tinker with superannuation despite promises to leave it alone for the foreseeable future. While it's likely to be welcome news for small business, constant changes to the superannuation law leads to uncertainty and a lack of confidence in both the business and financial sectors. We doubt this will be the last change to super during this term either.

Other small business measures associated with the Mining Tax were not fortunate enough to survive the negotiations. This means that the loss carry-back provisions for companies, the instant asset write down measures and accelerated depreciation for motor vehicles will be abolished.

The loss carry back provisions were only in effect for one year and will not be available any longer, while the instant asset write down will drop from $6,500 to $1,000 retrospectively, applying from 1st January 2014. The accelerated depreciation for motor vehicles allowance provided that the first $5,000 of a motor vehicle purchase could be claimed as an immediate deduction. This too will be abolished retrospectively from 1st January 2014. These two measures together did not provide any greater deduction to small businesses over time. They simply allowed a deduction for the associated costs to be brought forward.

The axing of these incentives will lead to a significant saving in the Federal Budget. Unfortunately it will be a saving largely funded by small business.

Posted: September 03, 2014 | 0 comments