Small Business – Winner of Australian Federal Budget 2015/16

What is a ‘Small Business’? First of all, it’s important to note that you have to be a small business to qualify for all the business tax measures outlined in the 2015 Federal Budget package. That means your business must have an aggregated annual turnover of less than $2m. (The aggregated annual turnover is the total turnover of your business, your connected entities and your affiliates).

Small Business Tax Cut From July 1 2015, the business tax rate payable by small companies will fall from 30 per cent to 28.5 per cent, in a move expected to benefit nearly 800,000 businesses. Better still, the current maximum 30 per cent franking credit will still be available to the shareholders of these companies.

Small businesses who operate through unincorporated structure (e.g. sole trader, partnership or trust) will receive a 5% discount on the tax payable on the profits from their business, up to a maximum of $1,000 per individual. The discount will be given in the form of a tax offset through their year-end tax return. Instant tax deduction for asset purchases of $20,000 or less It is anticipated 75% of all SME’s will claim the $20,000 tax write-off announced in this year’s budget.

From now until 30 June 2017, small businesses are able to claim an immediate tax deduction for all assets acquired for use in the business up to a value of $20,000 (from current limit of $1,000) per asset. This is no limit of how many assets you can claim.

Businesses can make purchases before June 30, 2015 and see an almost immediate reduction in their business tax liability for 2015.

On top of the deduction of new assets, if the balance of a Small Business General Pool is under $20,000, an immediate deduction could be claimed for the whole balance.

A little caution need to be exercised here. In particular, note the following:

• Assets which cost more than $20,000 (net GST) do not qualify for the tax break at all. These assets must be depreciated in line with the current rules.
• Don’t forget those extra costs which you might incur to get an asset into a state where it can be used in the business. For example: if you spend $19,500 on purchasing an asset but have to spend another $1,000 on installing the asset to make it useable, you won’t qualify.
• Consider the cash you have available and your upcoming cash obligations before investing in new assets. Only purchase assets if you have a real business need for it. Remember you have to spend a dollar to get 30 cents back (or 28.5 cents after July 1), so make sure any capital purchases fit with your overall business plan.

How do I get more information?

Consolid8 are business tax experts and can give you tax advice in all aspects of your business. Get in touch with our business advisory services team on 1300 222 353 if you require more information about how the Federal Budget will affect tax planning for business or your company tax.