Some business related Budget measures that may be of interest to businesses are outlined below.
The Government will improve the operation of the rules relating to the calculation and collection of income tax liabilities from consolidated groups and multiple entry consolidated groups (MEC groups) by:
The Government will introduce legislation to make amendments to the CGT provisions to improve the ability of businesses to restructure.
The Government will:
The three measures will apply to CGT events happening after 7.30 pm (AEST) on 11 May 2010.
In relation to the second amendment, the Government will allow Australian interest holders access to a broader range of CGT rollovers where an entity restructures using a share or interest sale facility for foreign interest holders. Currently, where a business restructures and it uses a share or interest sale facility for foreign interest holders, Australian resident interest holders are unable to access some CGT rollovers.
The share sale facility exclusion that currently operates in limited circumstances for Authorised Deposit-taking Institutions will be extended to operate more broadly for other entities and for other relevant CGT rollovers.
In relation to the third change, the Government will amend the CGT demerger relief provisions to allow another member of a demerger group to qualify as the head entity of the group where the existing head entity cannot demerge its interests in the demerger group. The measure will correct a defect in the current legislation that prevents demerger groups from accessing demerger relief where the group includes a corporation sole or a complying superannuation entity.
The Government will allow all payments under a qualifying earnout arrangement to be treated as relating to the underlying business asset. The measure will have effect from the date of Royal Assent of the enabling legislation, with transitional provisions available in certain cases from 17 October 2007.
Earnout arrangements are used to structure the sale of a business (or business assets) to manage uncertainty about the value of the business. Under the earnout arrangement, an earnout right may entitle the buyer or seller to additional payments depending on the subsequent performance of the business.
Currently, an earnout right is treated as a separate CGT asset – see draft Taxation Ruling TR 2007/D10. This treatment can result in anomalous outcomes for taxpayers where the actual payments under the earnout right differ from the amounts estimated at the start of the arrangement, such as by reducing access to the CGT small business concessions.
This measure will ensure that the CGT treatment of earnout arrangements does not create an impediment to the efficient market for the sale of businesses or business assets.
The Government will reduce compliance costs for businesses through a package of GST reform measures to help business owners spend less time wading through red tape.
These measures are designed to reduce the number of non-residents that need to be involved in the GST system and protect the GST base.
The key components of the plan are:
The reforms are the result of three reviews into specific aspects of the GST announced in the 2009-10 Budget following recommendations by the Board of Taxation’s Review of the Legal Framework for the Administration of the GST.
The Government has announced that it will implement all the recommendations of the Board of Taxation from its Review of the application of GST to cross-border transactions, with effect from 1 July 2012.
The package will significantly reduce the number of non-residents who are unnecessarily drawn into Australia’s GST system by:
The Government will make a number of minor revisions to its 2009-10 Budget measure that reduces GST compliance costs for businesses involved in the domestic transport of exported and imported goods, to ensure that the place of consignment will always be determined by the place of delivery in the principal contract. This measure will have an ongoing negligible revenue impact and an ongoing negligible impact on GST payments to the States and Territories.
The measure will also ensure that ancillary services to the international transport of goods receive the same GST treatment as the transport supply that they facilitate.
The following are the highlights of the Government’s response.
The Government has announced that the company tax rate will be reduced to 29% from 2013/14, and to 28% from 2014/15.
It was recommended in the Henry Report that the company tax rate be reduced to 25% over the short to medium term, with the timing subject to economic and fiscal circumstances (Rec 27).
The company tax rate for "eligible small business companies" will be reduced to 28% from 2012/13 (ie two years earlier than for other companies).
The capital allowances provisions will be changed in order to allow small businesses:
Currently, depreciating assets may be allocated to 2 different depreciating pools. This will not apply to buildings.
The revised rules will apply from 1 July 2012.
A Resource Super Profits Tax (RSPT) will be introduced on 1 July 2012 at a rate of 40% on profits made from the exploitation of Australia’s non-renewable resources.
The RSPT will replace the crude oil excise, and operate in parallel with State and Territory royalty regimes. Projects within the scope of the Petroleum Resource Rent Tax (PRRT) will have the option of opting into the RSPT or staying in the PRRT. The election into the RSPT will be irrevocable.
Under the RSPT a refundable credit for royalties paid to State and Territory Governments will be available. The refundable credit will eliminate investment distortions associated with the state royalty systems and ensure there is no ‘double taxation’ of resource profits.
Under the RSPT the Government will guarantee to contribute 40% of the investment cost of a resource project.
The Government will consult extensively with stakeholders on the design of the RSPT. The consultation will also cover the need for exemptions from the RSPT where, due to compliance costs, there is no net benefit to society in applying the RSPT. This may occur in respect of low value minerals or micro businesses.
The Government has promised that in the coming months it will have more to say on a number of areas considered by the review.
The business related recommendation by the Government has said it will consider from the Henry Review include:
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