Agents win with loss carry-back, quicker write-offs

While many principals and agents should benefit from some of the small business initiatives in last week’s Budget, the Real Estate Institute of Australia (REIA) said the government’s push for a surplus could crimp broader economic growth.

As part of a detailed ‘Budget Snapshot’ report released late last week, the REIA said various small business initiatives would provide some relief for industry professionals.

These included the ability of small businesses to immediately write-off each eligible business asset they buy costing less than $6,500 per asset, and claiming up to $5,000 as an immediate deduction for new or used motor vehicles acquired from the 2012-13 income year.

“The remainder of the motor vehicle’s cost will be pooled in the general small business pool (depreciated at 15 per cent in the purchase year and then 30 per cent in other years),” the REIA said.

The REIA also lauded the Government’s decision to provide $8.3 million over four years to establish an office of the Australian Small Business Commissioner, to provide advocacy and representation of small business interests. “This is something the REIA has previously called for,” the REIA said.

Another win for small business was the introduction of a ‘loss carry-back’ provision.

“In 2012-13, companies will be able to carry back tax losses of up to $1 million so they get a refund against tax previously paid,” the REIA said.

“From 2013-14 companies will be able to carry back tax losses for two years. This provides a tax benefit of up to $300,000 per year. For example, a manufacturer makes a profit in 2011-12 and pays $300,000 tax. The next year they make a loss due to depreciation on new investments. They qualify for loss carry-back and are able to get up to $300,000 back.”

Yet the REIA said the push to deliver a surplus was at the expense of the broader economy.

“The contraction in government spending from 2011-2012 to this year’s Budget is enormous – around $46 billion in one year, or 3.1 per cent of GDP. The impact on the economy is made greater when one considers low private demand.

“With moderate overall trend growth and many sectors well below this there was no economic imperative to pursue a surplus.

“There is a risk the economy may not grow at the rates in the Budget forecasts. This, if it happened, would increase the unemployment rate. The Budget does, however, increase the likelihood of interest rate cuts by the RBA.

“While we are pleased there has been no change to negative gearing or capital gains tax, there is nothing in this Budget that directly addresses our concerns over housing affordability.

“Real estate agents will benefit from the write-offs for assets and cars and those that are incorporated will benefit from the loss carry-back but will be disappointed that the promised cuts to company tax [from 30 per cent to 29 per cent] won’t be delivered.”

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