Small Business Will Pay For The Mining Tax Repeal Losing Billions Of Dollars In Asset Depreciation

Writing off the total value of your computer in a single year is no longer an option under changes brought in with the mining tax repeal. Photo: Getty Images

The mining tax abolition scored all the headlines on Tuesday when the Abbott Government’s legislation was finally ticked off by the Senate, but it was a trojan horse – a distraction in the government’s push to balance the budget.

The repeal comes with a bunch of other changes that add only $2 billion in revenue savings. Much of the heavy lifting to balance the budget will be done by small business, with changes to tax deductibility and depreciation for that sector replacing nearly 70% of the money forgone in scrapping the mining tax, Parliamentary papers explains.

It seems like small stuff, but it adds up pretty quickly.

The biggest change is reducing the instant asset write-off threshold from $5000, down to $1000, netting the government an extra $2.3 billion.

So that means that while you used to be able to write off the total cost of your $2000 laptop in its first year, that’s gone under Clive Palmer’s deal.

You used to be able to pool items to the total value, but that’s gone too.

Coincidentally, the mining industry receives a taxpayer subsidy of around $2.3 billion as its share of the $6 billion diesel fuel rebate.

Small business was able to deduct the first $5000 of the cost of a motor vehicle, plus 15 per cent of any remaining cost, in that first year.

Not any more.

Ending the accelerated depreciation on cars will transfer another $450 million from small business to Joe Hockey up until the end of the 2016-17 financial year.

Then there’s this:

Companies were able to either carry tax losses forward as a deduction for a future income year or carry up to $1 million back to an earlier year (in which they paid tax) to obtain a tax offset for the current year.

Under the repeal deal, companies can only carry tax losses forward as a deduction for a future year.

There’s another $950 million for the Government, while a small business loses up to $300,000 on its bottom line.

That brings small business’ contribution to make up for scrapping the mining tax to $3.7 billion.

What’s even worse is the threat of all of this being retrospective is hanging over the heads of the small businesses that have already lodged their 2013-14 returns.

While the Government argues it’s putting money back in workers’ pockets by delaying increases in superannuation – it’s also putting an extra $1.58 billion in its coffers over the next 3 years as a result – it’s also pulling it out of the pockets of nearly 1 million small businesspeople.

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