2016-2017
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
TREASURY LAWS AMENDMENT (ACCELERATED DEPRECIATION FOR
SMALL BUSINESS ENTITIES) BILL 2017
EXPLANATORY MEMORANDUM
(Circulated by authority of the
Minister for Small Business, the Hon Michael McCormack MP)
Table of contents
Glossary ................................................................................................. 1
General outline and financial impact....................................................... 3
Chapter 1
Extending accelerated depreciation for small
business entities ........................................................... 5
Chapter 2
Regulation impact statement ........................................13
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
Abbreviation
Definition
ATO
Australian Taxation Office
ITAA 1997
Income Tax Assessment Act 1997
1
General outline and financial impact
Extending accelerated depreciation for small business
entities
Schedule 1 to this Bill amends the tax law to extend by 12 months to
30 June 2018 the period during which small business entities can access
expanded accelerated depreciation rules. This extension provides a boost
to small business activity and investment for another year.
Date of effect: This measure applies from 1 July 2017.
Proposal announced: This measure was announced by the Treasurer on
9 May 2017 as part of the 2017-18 Budget.
Financial impact: This measure is estimated to have the following
revenue impact over the forward estimates period:
2016-17
2017-18
2018-19
2019-20
2020-21
-
..
-$950m
$50m
$250m
- nil
.. not zero, but rounded to zero
Human rights implications: This Bill does not raise any human rights
issues. See Statement of Compatibility with Human Rights,
paragraphs 1.27 to 1.31.
Compliance cost impact: There is an estimated total average annual
regulatory saving for businesses associated with this measure of
$2.4 million.
Summary of regulation impact statement
Regulation impact on business
Main points:
• Small businesses contribute in many ways to the Australian
economy, but they often deal with various operational
challenges including cash flow problems and
disproportionately higher compliance burdens.
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Treasury Laws Amendment (Accelerated Depreciation For Small Business Entities) Bill 2017
• Extending accelerated depreciation for small business entities
for an extra 12 months will continue to stimulate small
business investment and growth by providing cash flow
benefits and reducing red tape.
• This measure is expected to result in a small overall
compliance saving.
4
Chapter 1
Extending accelerated depreciation for
small business entities
Outline of chapter
1.1
Schedule 1 to this Bill amends the accelerated depreciation rules
for small business entities to extend by 12 months to 30 June 2018 the
availability of an immediate deduction for depreciating assets, amounts
included in the second element of a depreciating asset’s cost and general
small business pools, where the amount is less than $20,000 rather than
$1,000. This will continue to improve cash flow for small businesses,
providing a boost to small business activity and investment for another
year.
1.2
During this period, the increased threshold continues to be
available to all small business entities (including those that previously
opted out of the accelerated depreciation rules).
1.3
All legislative references are to the Income Tax Assessment
Act 1997 (ITAA 1997) unless the contrary is indicated.
Context of amendments
Small business entities
1.4
Division 328 of the ITAA 1997 provides a range of income tax
concessions for small business entities, including access to simplified
depreciation rules (see Subdivision 328-C). Under section 328-110 an
entity is a small business entity for an income year if the entity carries on
a business in that year and either:
• the entity carried on a business in the prior income year and
its aggregated turnover was less than a threshold amount; or
• the aggregated turnover of the entity in the current income
year is likely to be less than that threshold.
1.5
In the 2015-16 income year, the threshold was $2 million, while
for 2016-17 and later income years it is $10 million.
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Treasury Laws Amendment (Accelerated Depreciation For Small Business Entities) Bill 2017
Accelerated depreciation for small business entities
1.6
The Tax Laws Amendment (Small Business Measures No. 2)
Act 2015 amended the tax law to temporarily increase to $20,000 the
threshold below which certain depreciating assets, costs relating to
depreciating assets and general small business pools can be immediately
deducted by small business entities. Prior to these amendments, the
temporary increase applied from 7.30 pm, by legal time in the Australian
Capital Territory, on 12 May 2015 until 30 June 2017 with the threshold
reverting back to $1,000 from 1 July 2017.
1.7
In the 2017-18 Budget, the Government announced an extension
to the application period of the temporarily increased threshold for
12 months until 30 June 2018. This encourages additional capital
investment by small businesses through lowering the pre-tax rate of return
required to justify new investments for an additional 12 months.
Increasing the immediate deduction for capital expenditure improves
small businesses’ cash flow. Small businesses tend to be more vulnerable
to cash flow problems than larger businesses because their profitability
tends to be more volatile and they have lower levels of retained earnings.
The impact is expected to be bigger for new small businesses, as large
capital expenditures often occur early in the life of businesses.
Summary of new law
1.8
This Bill amends the accelerated depreciation rules for small
businesses to extend by 12 months to 30 June 2018 the availability of an
immediate deduction for depreciating assets, amounts included in the
second element of a depreciating asset’s cost and general small business
pools, where the amount is less than $20,000.
1.9
This Bill ensures that during this period, the $20,000 threshold
continues to be available to all small business entities (including those that
previously opted out of the accelerated depreciation rules).
Comparison of key features of new law and current law
New law
Current law
Extension of deduction for depreciating assets costing less than $20,000
Small business entities can claim an
immediate deduction for depreciating
assets that cost less than $20,000,
provided the asset is first acquired at
6
Small business entities can claim an
immediate deduction for depreciating
assets that cost less than $20,000,
provided the asset is first acquired at
Extending accelerated depreciation for small business entities
New law
or after 7.30 pm, by legal time in the
Australian Capital Territory, on
12 May 2015, and first used or
installed ready for use on or before
30 June 2018. Depreciating assets
that do not meet these timing
requirements continue to be subject to
the $1,000 threshold.
Current law
or after 7.30 pm, by legal time in the
Australian Capital Territory, on
12 May 2015, and first used or
installed ready for use on or before
30 June 2017. Depreciating assets
that do not meet these timing
requirements continue to be subject to
the $1,000 threshold.
Small business entities can claim an
Small business entities can claim an
immediate deduction for depreciating immediate deduction for depreciating
assets that cost less than $1,000 if the assets that cost less than $1,000 if the
asset is first used or installed ready
asset is first used or installed ready
for use on or after 1 July 2018.
for use on or after 1 July 2017.
Extension for deduction for amounts included in the second element of the
cost of depreciating assets
Small business entities can claim a
Small business entities can claim a
deduction for an amount included in
deduction for an amount included in
the second element of the cost of
the second element of the cost of
depreciating assets that are first used
depreciating assets that are first used
or installed ready for use in a
or installed ready for use in a
previous income year. The total
previous income year. The total
amount of the cost must be less than
amount of the cost must be less than
$20,000 and the cost must be incurred $20,000 and the cost must be incurred
at or after 7.30 pm, by legal time in
at or after 7.30 pm, by legal time in
the Australian Capital Territory, on
the Australian Capital Territory, on
12 May 2015, and on or before
12 May 2015, and on or before
30 June 2018. Costs that are incurred 30 June 2017. Costs that are incurred
outside of these times continue to be
outside of these times continue to be
subject to the $1,000 threshold.
subject to the $1,000 threshold.
Small business entities can claim a
deduction for an amount included in
the second element of the cost of
depreciating assets that are first used
or installed ready for use in a
previous income year, where the
amount is less than $1,000, and the
cost is incurred on or after
1 July 2018.
Small business entities can claim a
deduction for an amount included in
the second element of the cost of
depreciating assets that are first used
or installed ready for use in a
previous income year, where the
amount is less than $1,000, and the
cost is incurred on or after
1 July 2017.
Extension of deduction for low pool values
From 7.30 pm, by legal time in the
Australian Capital Territory, on
12 May 2015, assets that cost $20,000
or more, and costs of $20,000 or
more relating to depreciating assets
can be allocated to a small business
entity’s general small business pool
and deducted at a specified rate for
the depletion of the pool.
From 7.30 pm, by legal time in the
Australian Capital Territory, on
12 May 2015, assets that cost $20,000
or more, and costs of $20,000 or
more relating to depreciating assets
can be allocated to a small business
entity’s general small business pool
and deducted at a specified rate for
the depletion of the pool.
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Treasury Laws Amendment (Accelerated Depreciation For Small Business Entities) Bill 2017
New law
Current law
Assets and costs allocated to a
general small business pool are
deducted at a rate of 15 per cent in
the year they are allocated, and a rate
of 30 per cent in subsequent income
years.
Assets and costs allocated to a
general small business pool are
deducted at a rate of 15 per cent in the
year they are allocated, and a rate of
30 per cent in subsequent income
years.
If the balance of a small business
entity’s general small business pool is
less than $20,000 at the end of an
income year, the small business entity
can claim a deduction for the entire
balance of the pool. The income year
must end on or after 12 May 2015,
and on or before 30 June 2018.
If the balance of a small business
entity’s general small business pool is
less than $20,000 at the end of an
income year, the small business entity
can claim a deduction for the entire
balance of the pool. The income year
must end on or after 12 May 2015,
and on or before 30 June 2017.
If the balance of a small business
entity’s general small business pool is
less than $1,000 at the end of an
income year that ends after
30 June 2018, the small business
entity can claim a deduction for the
entire balance of the pool.
If the balance of a small business
entity’s general small business pool
is less than $1,000 at the end of an
income year that ends after
30 June 2017, the small business
entity can claim a deduction for the
entire balance of the pool.
Deferral of five year ‘lock-out’ rule
The increased threshold that applies
between 12 May 2015 and
30 June 2018 applies to all small
business entities, including those
subject to the five year lock-out rule
in that period because the small
business previously opted out of the
small business entity capital
allowance provisions.
The increased threshold that applies
between 12 May 2015 and
30 June 2017 applies to all small
business entities, including those
subject to the five year lock-out rule
in that period because the small
business previously opted out of the
small business entity capital
allowance provisions.
For the purposes of applying the
lock-out rule to an income year after
30 June 2018, only the choice made
in the last income year ending on or
before 30 June 2018 is relevant.
For the purposes of applying the
lock-out rule to an income year after
30 June 2017, only the choice made
in the last income year ending on or
before 30 June 2017 is relevant.
Detailed explanation of new law
1.10
The period is extended for which the temporary $20,000
threshold applies for the cost of depreciating assets, costs incurred in
relation to a depreciating asset included in the second element of a
depreciating asset’s cost base, and the low pool value deduction under the
small business entity capital allowance provisions.
8
Extending accelerated depreciation for small business entities
1.11
The temporary threshold now ceases to be available after
30 June 2018 rather than 30 June 2017. The threshold returns to $1,000
from 1 July 2018.
Deductions for depreciating assets
1.12
A small business entity that has elected to use the small business
entity capital allowance rules in Subdivision 328-C for an income year
may immediately deduct or ‘write off’ the taxable purpose proportion of
the cost of an asset acquired for less than a threshold amount.
1.13
The ‘taxable purpose proportion’ of a depreciating asset is
defined in subsection 328-205(3) and in general terms represents the
proportion of an asset’s use in an income year that is for the purposes of
producing assessable income. The deduction for assets that cost less than
the threshold is claimed in the income year in which the asset was first
used or installed ready for use.
1.14
This threshold is generally $1,000. However, prior to these
amendments a higher $20,000 threshold applied for assets that were first
acquired at or after 7.30 pm, legal time in the Australian Capital Territory
on 12 May 2015, and first used or installed ready for use on or before
30 June 2017.
1.15
The amendments extend the period to which the increased
threshold applies. It now applies to assets that were first acquired at or
after 7.30 pm, legal time in the Australian Capital Territory on
12 May 2015 and first used or installed ready for use on or before
30 June 2018. [Schedule 1, item 10, paragraph 328-180(4)(b) of the Income Tax
(Transitional Provisions) Act 1997]
Deductions for amounts included in the second element of the cost of
depreciating assets
1.16
A small business entity can also immediately deduct an amount
included in the second element of a depreciating asset’s cost (for example,
an amount spent on improving or transporting a depreciating asset),
provided the amount is:
• less than the threshold;
• the first such amount to be deducted in respect of the asset;
and
• the asset was written off (its cost was fully deducted) in a
previous income year.
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Treasury Laws Amendment (Accelerated Depreciation For Small Business Entities) Bill 2017
1.17
Consistent with the changes to the threshold for writing off
depreciating assets, this threshold is generally $1,000. However, prior to
these amendments a higher $20,000 threshold applied for costs included
in the second element of the depreciating assets cost during the period
commencing at 7.30 pm, by legal time in the Australian Capital Territory,
on 12 May 2015 and ending on 30 June 2017.
1.18
The amendments extend the period in which the increased
threshold applies. It now applies to amounts included in the second
element of the asset’s cost during the period commencing 7.30 pm, legal
time in the Australian Capital Territory on 12 May 2015 and ending on
30 June 2018. [Schedule 1, item 11, paragraph 328-180(5)(b) of the Income Tax
(Transitional Provisions) Act 1997]
Deductions for low pool values
1.19
A small business entity can also deduct the balance of its general
small business pool at the end of an income year if the balance of the pool
at the end of the year is less than a threshold amount. For this purpose, the
balance of the pool is determined prior to calculating any deductions in
respect of the pool for the income year.
1.20
This threshold is generally $1,000. However, prior to these
amendments a higher $20,000 threshold applied to income years that end
during the period commencing at 7.30 pm, by legal time in the Australian
Capital Territory, on 12 May 2015 and ending on 30 June 2017.
1.21
The amendments extend the period in which the increased
threshold applies. It now applies to income years that end during the
period commencing at 7.30 pm, by legal time in the Australian Capital
Territory, on 12 May 2015 and ending on 30 June 2018. [Schedule 1, item 9,
the definition of increased access year in subsection 328-180(1) of the Income Tax
(Transitional Provisions) Act 1997]
Five year ‘lock-out’ rule
1.22
A small business entity that elects to apply the small business
capital allowance provisions in an income year, and then does not choose
to apply the provisions for a later income year in which the entity satisfies
the conditions to make this choice (that is, the entity ‘opted out’), is not
able to apply the small business capital allowance provisions for a period
of five income years. This restriction commences from the first of the later
years for which the entity could have made the choice to apply the
provisions. This rule is contained in subsection 328-175(10), and is
commonly referred to as the ‘lock-out’ rule.
10
Extending accelerated depreciation for small business entities
1.23
Prior to these amendments, the operation of the lock-out rule
was modified for income years that ended on or after 12 May 2015 but on
or before 30 June 2017 (referred to as ‘increased access years’). Small
business entities did not need to apply the lock-out rule to these years.
Further, when determining whether the lock-out rule applies in years after
the increased access years, all income years prior to the last increased
access year are disregarded.
1.24
The amendments extend the period for which the operation of
the lock-out rule is modified. The modifications now apply for income
years that end on or after 12 May 2015 but on or before 30 June 2018. For
most small business entities, this results in one further increased access
year. [Schedule 1, item 9, the definition of increased access year in subsection
328-180(1) of the Income Tax (Transitional Provisions) Act 1997]
Consequential amendments
1.25
A number of consequential amendments are made to the
ITAA 1997 and the Income Tax (Transitional Provisions) Act 1997 to
update relevant guidance material to reflect the amendments made by
Schedule 1 to this Bill. [Schedule 1, items 1 to 8, the notes to paragraphs
328-180(1)(b), (2)(a) and (3)(a), note 2 to subsection 328-210(1) and the notes to
subsections 328-250(1), (4) and 328-253(4) of the ITAA 1997 and the heading to
section 328-180 of the Income Tax (Transitional Provisions) Act 1997].
1.26
The Bill also makes consequential amendments to the Tax Laws
Amendment (Small Business Measures No. 2) Act 2015 so that the
provisions relating to the temporary threshold will no longer be
automatically repealed. This ensures that the provisions are not repealed
while they still have operative effect due to the one year extension made
by Schedule 1 to this Bill. [Schedule 1, items 12 and 13, items 3 and 4 in the table
in subsection 2(1) and Part 2 of Schedule 1 to the Tax Laws Amendment (Small
Business Measures No. 2) Act 2015]
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Treasury Laws Amendment (Accelerated Depreciation For Small Business Entities) Bill 2017
STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS
Prepared in accordance with Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011
Treasury Laws Amendment (Accelerated Depreciation For Small
Business Entities) Bill 2017
1.27
This Bill is compatible with the human rights and freedoms
recognised or declared in the international instruments listed in section 3
of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview
1.28
This Bill amends the accelerated depreciation rules for small
businesses to extend by 12 months to 30 June 2018 the availability of an
immediate deduction for depreciating assets, amounts included in the
second element of a depreciating asset’s cost and general small business
pools, where the amount is less than a threshold of $20,000. This will
continue to improve cash flow for small businesses, providing a boost to
small business activity and investment for another year.
1.29
During this period, the $20,000 threshold continues to be
available to all small business entities (including those that previously
opted out of the accelerated depreciation rules).
Human rights implications
1.30
This Bill does not engage any of the applicable rights or
freedoms.
Conclusion
1.31
This Bill is compatible with human rights as it does not raise any
human rights issues.
12
Chapter 2
Regulation impact statement
Proposal: Extending the immediate deductibility threshold for
small businesses
Assessment of the regulatory impacts
1. What is the problem you are trying to solve?
2.1
There are over 3 million small businesses in Australia. These
small businesses contribute in many ways to the Australian economy – the
small business sector contributes to national growth and competitiveness.
Small businesses are also adaptable and flexible and they can respond
quickly to changing circumstances. According to the Australian Bureau of
Statistics, small businesses added around $380 billion to the Australian
economy in 2014-15.
2.2
Small businesses, however, face a unique set of operational
challenges in the economy. This can be illustrated by the typically higher
failure rates for small businesses compared with larger companies. Small
businesses tend to be more vulnerable to cash flow problems than their
larger counterparts because their profitability tends to be more volatile and
they have lower levels of retained earnings. It is also not unusual for small
businesses to have to manage a disproportionately higher compliance
burden, per unit of turnover, than larger businesses.
2.3
Small businesses currently have access to a range of tax
concessions – in particular, small businesses are able to fully and
immediately deduct each eligible depreciating business asset they
purchase costing less than $20,000 (“the immediate deductibility
threshold”). The $20,000 threshold was the result of the 2015-16 Budget.
It has been in place since 12 May 2015 and expires on 30 June 2017. This
encourages small businesses to invest in new assets and replace old and
out-dated equipment.
2.4
The ability to immediately deduct assets below $20,000 is
available to small businesses with turnover less than $2 million.
Businesses with turnover between $2 million and $10 million gain access
to the concession from 1 July 2016 under the Enterprise Tax Plan
legislation. Around 90,000 additional businesses gain access to the
concession.
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Treasury Laws Amendment (Accelerated Depreciation For Small Business Entities) Bill 2017
2.5
The immediate deductibility threshold of $20,000 for small
businesses will expire and revert back to $1,000 on 1 July 2017, unless
there is government intervention.
2. Why is government action needed?
2.6
There is a clear role for government to create the right policy
settings for Australian small businesses. The Government’s objective with
this proposal is to continue to stimulate small business investment and
growth by providing cash flow benefits and reducing red tape for small
businesses.
2.7
Australian small businesses are the engine room of our
economy, making up 99 per cent of all businesses and contributing $380
billion to the economy. A strong small business sector means more jobs
for Australians and more opportunities to build vibrant local communities
across the country.
3. What policy options are you considering?
Option 1: No policy change (revert to $1,000 immediate deductibility
threshold from 1 July 2017)
2.8
Under this option, there would be no new action taken by the
Government and current rules regarding the immediate deductibility
threshold (for assets costing less than $20,000) would cease on 30 June
2017. Small businesses would go back to only being able to claim an
immediate tax deduction for asset purchases that cost less than $1,000
from 1 July 2017.
Option 2: Extending the immediate deductibility threshold until 30 June
2018 at the current $20,000 threshold (preferred option)
2.9
This option would extend the $20,000 immediate deductibility
threshold for small businesses for an extra 12 months until 30 June 2018.
2.10
Small businesses would be able to immediately deduct
purchases of eligible assets costing less than $20,000 first used or installed
ready for use by 30 June 2018. Assets valued at $20,000 or more (which
cannot be immediately deducted) would continue to be placed into the
small business simplified depreciation pool and depreciated at 15 per cent
in the first income year and 30 per cent each income year thereafter. The
pool could also be immediately deducted if the balance is less than
$20,000 over this period (including existing pools).
14
Regulation impact statement
Option 3: Extending the immediate deductibility threshold until 30 June
2018 but decreasing it from $20,000 to $15,000
2.11
This option would extend the immediate deductibility measure
for a further 12 months but decrease the threshold so that it applies to
eligible assets each costing less than $15,000 (not $20,000). Eligible
assets valued at $15,000 or more (which could not be immediately
deducted) could be placed into the small business simplified depreciation
pool and depreciated at the same rates as outlined above under Option 2.
The pool could also be immediately deducted if the balance is less than
$15,000 over this period (including existing pools).
4. What is the likely net benefit of each option?
Option 1: No policy change (revert to $1,000 immediate deductibility
threshold from 1 July 2017)
2.12
Under this option, the current immediate deductibility threshold
will expire and revert back to $1,000 from 1 July 2017.
Benefits
2.13
The benefit of this option is that there would not be a revenue
impact over the forward estimates.
Costs
2.14
The cost of this option, however, is that it would not stimulate
small business investment and growth, given that there would be no
additional cash flow benefits, and it would not reduce red tape for small
business.
Option 1 - Net outcome
2.15
While there would not be a cost to revenue over the forward
estimates, small business would not be able to access the additional cash
flow benefits and red tape savings.
Option 2: Extending the current immediate deductibility threshold until
30 June 2018 at the current $20,000 threshold (preferred option)
2.16
Under this option, the $20,000 immediate deductibility threshold
for small businesses would be extended for an extra 12 months until
30 June 2018.
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Treasury Laws Amendment (Accelerated Depreciation For Small Business Entities) Bill 2017
Benefits
2.17
Currently, small businesses are able to immediately deduct the
cost of asset purchases that are valued at less than $20,000. Under the
Enterprise Tax Plan legislation, around 90,000 additional businesses gain
access to the concession.
2.18
Extending the immediate deductibility threshold until 30 June
2018 promotes small business investment and growth by providing
additional cash flow benefits and reducing red tape for small business.
2.19
Small businesses tend to be more vulnerable to cash flow
problems than larger businesses because their profitability tends to be
more volatile and they have lower levels of retained earnings. The cash
flow impact is also generally greater for new small businesses, as large
capital expenditures often occur early in the life cycle of a business.
2.20
Immediate deductibility generally improves cash flow for small
businesses by allowing an immediate deduction for the entire cost of an
asset costing less than $20,000 in the year that cost is incurred, rather than
deducting a proportion of the cost over a number of years under the
ordinary depreciation rules. In most instances, this reduces the tax bill of
small businesses in the current income year, improving cash flow and
therefore allowing them to use the extra funds to reinvest in their business.
2.21
There will also continue to be a compliance cost saving for small
businesses through not needing to maintain a depreciation schedule for
assets costing less than $20,000. There will also be less complexity in
filling out tax return forms for small business entities as depreciation
amounts for assets below $20,000 will no longer need to be calculated.
There will also be less complex record-keeping for assets costing $20,000
or more placed in the pool. This will result in an estimated total average
annual regulatory saving for businesses of $2.4 million (see Table 1).
Costs
2.22
This option will not increase compliance costs. In fact,
compared to the status quo, there will be a decrease in overall compliance
costs because it is an existing measure and there are no new requirements
associated with the extension for 12 months.
2.23
Even for the approximately 90,000 additional businesses that
gain access to the concession under the Enterprise Tax Plan legislation, it
is expected that these companies would have already incurred their
implementation compliance costs when planning their taxation affairs for
the 2016-17 financial year. These costs were taken into account in the
16
Regulation impact statement
context of the Regulation Impact Statement for the Treasury Laws
Amendment (Enterprise Tax Plan) Bill 2016.
2.24
This can be balanced with the financial cost. Extending the
measure for an additional 12 months is estimated to have a net cost to
revenue of $650 million over the forward estimates.
Option 2 - Net benefit
2.25
The net result is that the significant benefits of improved cash
flow for small businesses and reduced red tape outweigh the revenue costs
associated with this option.
Table 1: Regulatory burden estimate (RBE) table (Option 2)
Average annual regulatory costs (from business as usual)
Change in
costs
($ million)
Business
Community
organisations
Individuals
Total change
in cost
Total, by
sector
-2.4*
n/a
n/a
-2.4
*Average annual impact (calculated over 10 years).
Option 3: Extending the immediate deductibility threshold until 30 June
2018 but decreasing it from $20,000 to $15,000
2.26
This option would extend the immediate deductibility threshold
from 1 July 2017 until 30 June 2018 but decrease the threshold to
$15,000.
Benefits
2.27
This option would provide small businesses with similar cash
flow benefits as Option 2 but only in relation to assets costing less than
$15,000.
2.28
This option would also reduce compliance costs for small
businesses but to a lesser extent than Option 2 (see discussion below).
Costs
2.29
This option would result in a small decrease in compliance costs,
resulting in an estimated total average annual regulatory saving for
businesses of $0.2 million (see Table 2). Small businesses would need to
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Treasury Laws Amendment (Accelerated Depreciation For Small Business Entities) Bill 2017
understand and adjust to the change in the new $15,000 immediate
deductibility threshold which adds to the compliance burden of this
option.
2.30
Small businesses would not be able to access the benefits of
immediate deductibility for assets costing between $15,000 and $20,000.
2.31
It would have a lower estimated cost to revenue than a $20,000
immediate deductibility threshold over the forward estimates period.
Option 3 - Net benefit
2.32
The net result is that the benefits of improved cash flow and
reduced red tape for small business outweigh the costs associated with this
option but to a lesser extent than in Option 2.
Table 2: Regulatory burden estimate (RBE) table (Option 3)
Average annual regulatory costs (from business as usual)
Change in
costs
($ million)
Business
Community
organisations
Individuals
Total change
in cost
Total, by
sector
-0.2*
n/a
n/a
-0.2
*Average annual impact (calculated over 10 years).
5. Who will you consult about these options and how will you consult
them?
2.33
The current $20,000 immediate deductibility threshold was
introduced in the 2015-16 Budget following extensive stakeholder
consultation including with the Board of Taxation, the Australian
Taxation Office (ATO), small business stakeholder groups and
professional tax and accounting bodies.
2.34
Stakeholders have provided regular feedback on the
effectiveness of the measure. There is strong stakeholder support for
extending the immediate deductibility threshold.
18
Regulation impact statement
6. What is the best option from those you have considered?
2.35
Taking into account the various benefits associated with this
proposal, the preferred policy option is to extend the existing $20,000
immediate deductibility threshold for small business for an additional year
until 30 June 2018 (Option 2).
7. How will you implement and evaluate your chosen option?
2.36
Legislation is required to implement this proposal.
Implementation is expected to be straight-forward, as it is a continuation
of an existing measure.
2.37
The ATO has responsibility for administering the legislation.
Treasury and the ATO will continue to work together to implement the
preferred option.
2.38
Evaluation of this proposal is ongoing. Feedback from
stakeholders will continue to be assessed on a regular basis.
19