The Mining Resources tax was implemented to get big business funding a larger share of the Federal tax revenue bucket. Now that this has been repealed there are a number of additional measures that have changed which may impact on small business.

The major changes are –

  1. Repeal of company loss carry back rules
  2. Freezing of rate of compulsory superannuation contributions
  3. Changes to immediate asset deductions for small business

For more detail on how these can impact on your business refer below.

Repeal of the company loss carry back rules

Recognising that many businesses incur a loss at some point in their life cycle, the loss carry back rules were implemented in order to allow a company to access a refundable tax credit by allowing them to utilise a current year tax loss against a prior year’s tax liability. This would potentially allow a company to “Claw back” and obtain a refund for tax paid in prior years when it is followed by a tax loss year.

The loss carry back rules have been repealed effective from 1 July 2013 or, for companies with a substituted accounting period, from the start date of the 2014 income tax year. Hence the loss carry back rules can apply for the 2013 income tax year and from 2014 the old rules will apply in that the loss can be carried forward and utilised in future years, subject to passing the continuity

In cases where you have already lodged your 2014 income tax return and taken advantage of the loss carry back rules, the ATO will amend the return for you. They have indicated no penalties will be levied for taxpayers who relied on the previous loss carry back rules.

Freezing of compulsory Superannuation guarantee contributions

In what may be a welcome move for businesses in that the on costs for employees and workers will be lowered, the removal of the mining resource tax has resulted in the freezing of the compulsory super payments for business. Given that super is also included for workers compensation and payroll taxes, this will have the additional impact of cost savings in these areas.

With a current rate of 9.5% this will now stay in place until 1 July 2020 when it will increase by 0.5% each year until it reaches 12% on 1 July 2025.

To assist with budgeting here are the new superannuation contribution rates –

Year starting Superannuation Guarantee %

1 July 2014 9.5
1 July 2015 9.5
1 July 2016 9.5
1 July 2017 9.5
1 July 2018 9.5
1 July 2019 9.5
1 July 2020 9.5
1 July 2021 10
1 July 2022 10.5
1 July 2023 11
1 July 2024 11.5
On or after 1 July 2025 12

Removal of accelerated deductions for small business assets

The change in this area is slightly messy in that the changes will be effective from 1 January 2014. This means that for people who have already lodged their 30 June 2014 returns and relied on the ability to deduct immediately assets acquired costs less than $6,500, these returns now need to be amended. The ATO will not be doing this for you so you will need to instigate the amendment yourself.

From 1 January 2014, a small business entity (turnover less than $2M pa) can only obtain an immediate deduction for assets costing less than $1,000. The previous threshold of $6,500 will continue to apply until 31 December 2013.

Depreciating assets costing $1,000 or more from 1 January 2014 should be allocated to the SBEs general small business pool and depreciated at 15% in the income year in which the assets are first used or installed ready for use. The assets will then be depreciated as part of that pool at 30% in subsequent income years. This is not good news for taxpayers who relied on the $6,500 for purchases between 1 January 2014 and the recent change.