The Australian Tax Office doesn’t take kindly to “I didn’t know” and certainly won’t accept a lack of knowledge as an excuse. So here’s some key changes to the legal and tax system which you need to know this year.
- Legal Changes
The countless number of small businesses that operate under franchise systems should be aware of the new Franchising Code of Conduct which came into effect on January 1, 2015. These changes include a new duty imposed on franchisors and franchisees to act in good faith when dealing with one another. Franchisors are now required to provide franchisees with an information sheet outlining the risks and rewards of franchising. If you are a franchisor, be sure that your documentation and processes are updated to comply with the new requirements.
A significant portion of small businesses are held in private companies, and the Abbot government’s promised 1.5% reduction in the company tax rate from July 1, 2015 might increase that trend.
During 2014, the Australian Securities and Investments Commission worked with a number of state and federal government agencies as part of an ATO chaired ‘Fix It Squad’. The squad recommends ASIC to work with small businesses to increase awareness of what it means to be a company director. This also means that you should expect ASIC to continue to be on the lookout for small business directors who breach their duties and should be held accountable.
The new Australian Privacy Principles are now in full swing, including stronger enforcement powers than before for the Office of the Australian Information Commissioner (OAIC). We expect that the commissioner will be looking to exercise the increased powers so small businesses need to be wary about using cloud services to store ‘personal information’ concerning their staff, customers and suppliers.
The landscape for the increasing number of business owners who will be looking to retire in the next few years will continue to shift. Business owners who are pro-active about preserving and improving the value of their business and wealth through good succession planning will benefit. This also presents opportunities for the next generation of business owners.
- Tax Changes
Employee share scheme
The government released draft legislation last month outlining proposed changes to employee share option schemes. But the proposed changes have already proved controversial as the draft legislation only applies to Australian early-stage start-ups – in other words, companies with less than $50 million turnover, existing for less than 10 years. This excludes listed companies and won’t be any good to Australians employed by a foreign company if they get equity in that company.
Nonetheless, if the draft legislation is implemented this year it’s great news for SMEs. Small companies which struggle to get capital from elsewhere will enjoy having a way to attract capital and reward key employees.
Superannuation Clearing House
The Small Business Superannuation Clearing House is set to be broadened and is now available to any business with turnover of less than $2 million. For those who are unfamiliar with what it is – it’s a free online service that allows people to satisfy super guarantee allowance pretty easily and saves a lot of compliance costs. This broadening is anticipated to be passed before the end of the year.
Tax white paper and the GST
A rewrite of Division 7A is occurring alongside a broader consideration by the government of the taxation of trusts.
Division 7A has been a huge pain for businesses since it was introduced around 17 years ago. The law impacts private companies with trusts and aims to ensure funds can’t be removed from the company and given to shareholders or their associate’s tax free, but its effectiveness is debatable.
In terms of GST, it’s highly likely the promised tax white paper will flag an increase in the GST rate or a broadening of the base.
If you have any questions or concerns about tax laws which may affect your business, speak to one of our tax experts on 02 9299 7044.