Treasury Laws Amendment (Accelerated Depreciation for Small Business Entities) Act 2018

Overview

The Treasury Laws Amendment (Accelerated Depreciation for Small Business Entities) Act 2018 was enacted by the Parliament of Australia to amend existing tax laws, specifically focusing on providing accelerated depreciation benefits for small business entities. This Act was introduced to address a gap in the tax system that did not adequately support small businesses in recouping the cost of their depreciable assets quickly enough, potentially hindering their growth and competitiveness. The policy objective is to stimulate economic growth by supporting small businesses, which are a vital component of the Australian economy, through tax incentives that enhance their financial viability. This legislation amends the Income Tax Assessment Act 1997 and the Income Tax (Transitional Provisions) Act 1997 to extend the eligibility period for accelerated depreciation for small business entities, allowing them to claim deductions for the decline in value of their depreciable assets more swiftly. By extending the cut-off date for eligibility from 30 June 2018 to 30 June 2019, the Act aims to provide immediate relief and encourage investment in new assets by small businesses. The Act received Royal Assent on 21 September 2018 and the amendments to the relevant Acts commenced on 1 October 2018.

Scope and Application

The Treasury Laws Amendment (Accelerated Depreciation for Small Business Entities) Act 2018 is a Commonwealth Act that applies to small business entities within the ambit of the Income Tax Assessment Act 1997 and the Income Tax (Transitional Provisions) Act 1997. The Act extends to any small business entity that meets the criteria set out in these acts, which generally means businesses with an aggregated annual turnover of less than $50 million. The Act’s primary focus is to amend the existing tax laws to provide for accelerated depreciation deductions for depreciable assets acquired and first used or installed ready for use by small business entities after 12.30 pm (AEST) on 8 May 2018 and before 1 July 2019. The amendments made by the Act are effective from 1 October 2018, as per the commencement provisions, and extend the eligibility period for accelerated depreciation deductions to 30 June 2019. The Act does not specify any exclusions or exemptions, and its application is confined to the specified changes in the mentioned taxation acts. The Act does not extend or restrict its application through subordinate instruments as per the provided text.

Key Provisions

The Treasury Laws Amendment (Accelerated Depreciation for Small Business Entities) Act 2018 primarily amends the Income Tax Assessment Act 1997 and the Income Tax (Transitional Provisions) Act 1997. These amendments are detailed in Schedule 1 of the Act. The most notable changes include extending the eligibility period for accelerated depreciation deductions for small business entities from 30 June 2018 to 30 June 2019. Specifically, sections 328-180, 328-210, 328-250, and 328-253 of the Income Tax Assessment Act 1997 are modified to reflect this extension. Similarly, the Income Tax (Transitional Provisions) Act 1997 is amended to align with these changes. The Act imposes certain obligations on small business entities to ensure they meet the eligibility criteria for the accelerated depreciation deductions. To qualify, businesses must have an annual turnover of less than $50 million and be an Australian resident for tax purposes. They must also ensure that any depreciable assets placed in use and available for use before 12:01 am on 1 July 2018 are correctly valued and that depreciation deductions are claimed in accordance with the amended provisions. Compliance with these obligations is essential for small businesses to benefit from the accelerated depreciation measures introduced by the Act. Failure to comply with the provisions of the Act may result in civil or criminal consequences. For instance, under section 284-10 of the Income Tax Assessment Act 1997, individuals or entities that make a false or misleading statement in a tax return or fail to take reasonable care to ensure that a tax return is accurate and complete may incur a penalty. The maximum penalty for such offences can be up to 75 penalty points, which equates to a fine of $16,200 for individuals and $81,000 for entities, under section 284-15 of the same Act. Additionally, section 284-5 imposes a civil penalty of $2,220 for individuals and $11,100 for entities for failing to lodge a tax return. These penalties underscore the importance of adhering to the requirements set out in the Act.