Axing the Tax Concessions – the effects of the mining tax repeal on your business

As part of the Mineral Resource Rent Tax repeal package passed by Federal Parliament on 5 September 2014, several tax concessions for Small and Medium Enterprises that were to be funded by the revenue from that tax have also been scrapped. Additionally, the repeal of the tax concessions have been backdated, meaning that many businesses may face additional tax liabilities for the previous financial year.

Outlined below is a general overview of some of the concessions, which have been subject to the clawback.

If you consider the information contained in this article may relate to your business, we recommend that you get in touch with your accountant to obtain further specific advice relevant to the individual circumstances of your business.

Loss –carry back

One of the concessions repealed was the ‘loss carry-back’. This concession provided companies experiencing a current period loss with the option to claim a tax refund in the current period by offsetting the current loss against tax paid in previous, profitable financial years.

The repeal of this concession was backdated to 30 June 2014, meaning that any refund received for the 2013-14 financial year utilising the loss carry back concession may now be repayable to the Australian Tax Office.

Instant asset write-off threshold

The lowering of the ‘instant asset write-off threshold’ has also been reversed and backdated to be effective from 1 January 2014. Under the new regime, only assets costing up to $1,000 will be able to be written-off in one period, down from $6,500 previously.

Assets costing more than $1,000 will now be required to be depreciated as normal. Companies who instantly wrote-off assets costing between $1,000 and $6,500 in the 2013-14 financial year may now be liable to pay back the difference in their taxable incomes.

Accelerated deduction for motor vehicles

Finally, the ‘accelerated deduction for motor vehicles’ program has been scrapped as of 1 January 2014. This means that motor vehicles must be depreciated as normal, with businesses no longer able to claim an instant deduction of $5,000 for the financial year in which the vehicle was purchased.

The ATO has advised that it will not seek to enforce penalties or charge interest on affected tax returns, but the onus is on businesses to amend their returns ‘in reasonable time’. Given the vague and unclear nature of this direction, we recommend getting in touch with your accountant to seek specific advice on the above issues.

Article by: David Kehoe