A major winner of this year’s budget is small businesses. The government is hoping that these small businesses will take advantage of this and start investing in their businesses in order to generate future growth. From tax cuts to asset deductions, this is the time for small businesses to invest and take advantage of their current position. Below are some of the major budget announcements impacting small businesses.
For all the small unincorporated businesses who thought they might have been forgotten, you have not. There will be a 5% tax discount allowed until the capped limit of $1,000.00 per business. However this will not impact any small business until the 30 June 2016 when you lodge your income tax return.
The income tax rate for both public and private companies is 30%, however in this year’s budget to take effect for tax returns for the year ending 30 June 2016, small businesses (with a turnover revenue of under $2 million) will be reduced to 28.5% tax. The government is hoping that around 800,000 incorporated businesses will benefit from this, resulting in an increase in net earnings for small businesses.
In order to help grow jobs and small businesses the government is expanding accelerated depreciation for small businesses, by allowing those with an annual turnover of less than $2 million to invest in machinery or new tools, and receive an immediate tax deduction of all assets under $20,000.00. This is replacing the instant asset write off threshold of $1,000.00, though will cease on the 30th June 2017.
This is in order to help restore small business confidence as previously used by the Rudd government to stimulate the economy.
The immediate expenses incurred to start up a business and achieve a sale are costly. SMBs have constantly faced the issue of not being able to deduct these expenses, instead needing to have them written off over a five-year period. Small business owners will now have the ability to claim their professional start-up expenses immediately.
The fringe benefit tax on all portable devices including laptops, mobile phones and tablets used by small businesses has been abolished. Treasurer Joe Hockey believes the change makes sense in the digital age, as small business owners will no longer have to worry about choosing between a laptop and a tablet when claiming fringe benefits tax exemption. This measure applies from 1 April 2016, and is designed to remove confusion when it comes to what is and isn’t tax free.
Small businesses will often have to experiment with change and undergo a shift in legal structure in order to achieve their business goals. In the 2015 budget the government has proposed to allow those small businesses with an annual turnover of less than $2 million to freely change their legal structure without being subjected to a CGT liability at that point. These changes will commence from the 2016-2017 income year.
Overseas workers were not so lucky in the 2015 budget, with the government announcing that they will no longer be eligible for the $18,000 tax free threshold but will be subject to pay 32.5% on every dollar they earn up to $80,000. This will have negative impact on those businesses that rely on itinerant workers, especially non-resident holidaymakers to staff their business. The budget forecasts that $735 million in extra revenue will be raised.
For advice on how we can help you undertake any accounting issues you may have for you small business, contact us here at Nudge Accounting.