Australia’s small business sector faces growing uncertainty as crucial tax legislation changes remain in limbo. Proposed amendments, including the extension of the $20,000 instant asset write-off and the removal of tax deductibility for ATO interest charges (GIC and SIC), were left unresolved when the House of Representatives adjourned without a final vote. With the next parliamentary session not scheduled until March 2025—and the possibility of a federal election further complicating matters—small businesses are left navigating an unpredictable financial landscape.
Key Proposed Changes
- Instant Asset Write-Off: The Treasury Laws Amendment (Tax Incentives and Integrity) Bill 2024 aims to extend the $20,000 instant asset write-off for the 2024-2025 financial year. This provision allows small businesses to immediately deduct the cost of eligible business assets, facilitating investment and cash flow management.
- Deductibility of ATO Interest Charges: The same bill proposes removing tax deductibility for General Interest Charge (GIC) and Shortfall Interest Charge (SIC) imposed by the Australian Taxation Office (ATO). This change would mean that interest charges on overdue or underpaid taxes would no longer be tax-deductible, potentially increasing costs for businesses facing tax debts.
Current Status
Despite being scheduled for discussion, the House did not vote on the bill before adjourning. The next parliamentary session is set for March 25, 2025, coinciding with the federal budget announcement. If an election is called before this date, the legislative agenda, including this bill, may be further delayed or altered.
Implications for Small Businesses
- Uncertainty in Planning: The delay in legislative approval creates ambiguity for small businesses attempting to plan investments and manage cash flow for the upcoming financial year.
- Potential Financial Impact: If the bill passes with the proposed removal of deductibility for ATO interest charges, businesses with tax debts may face higher after-tax costs.
Will this impact your business?
MBC Group strongly recommends that all tax obligations are paid as and when they are due, however, we understand that from time to time, businesses may have delayed tax payments for a variety of reasons. To mitigate the impact of this change we recommend the following:
- Enhance Tax Compliance: Ensure timely and accurate tax filings to avoid incurring GIC and SIC.
- Review Financial Practices: Assess current financial strategies and consider setting aside reserves to cover potential tax liabilities.
- Seek Professional Advice: Speak with us to understand the full implications of these changes and to develop strategies tailored to your business needs. Don‘t avoid speaking to the ATO; come to us to help with those conversations.
Proactive planning and adherence to tax obligations are essential to navigate these upcoming changes effectively.
