Federal Budget Small Business Briefing
96 percent of Australia's businesses are small businesses, with over 280,000 new businesses started in 2013-14 alone. The ATO commonly defines small business as those with an aggregate annual sales of less than $2m. Small businesses make a large contribution to the economy.
So it's no surprise that many of the measures in the 2015 Federal budget are relevant for small business.
Tax on Asset Write-Offs
After reducing the value of assets eligible for immediate write off in 2014 to $1,000, in the 2015 Federal budget the government has temporarily increased that amount to $20,000. This is effective immediately but will revert back to $1,000 on 1 July, 2017.
This means that any depreciable assets your business buys up to a value of $20,000 can immediately be written off for tax.
This is great news if you were planning to buy some machinery or a company vehicle.
However, be wary of celebrating the government's generosity by buying assets that might not be necessary. The tax benefit is still only a fraction of the amount you have to spend to buy the asset in the first place. (It is not a dollar for dollar refund.)
Small Business Company Tax Rate
Thanks to the second big measure in the 2015 Budget the small business tax rate will be less from 1st July 2015.
The company tax rate for small businesses has been reduced by 1.5 percent to 28.5 percent and will apply for the 2016 financial year.
Unincorporated small businesses such as sole traders, partnerships or trusts will also receive a 5 percent tax discount capped at $1000 effective from the year ended 30 June 2016.
Tax on Business Start Up Costs
Effective from 1 July 2015 small businesses can now immediately deduct a range of professional expenses, including legal and accounting advice, associated with setting up a new company. Previously some of these expenses had to be deducted over a five year period.
Tax on Changes to Business Structure
Many new businesses start life as sole traders. As business grows it can often make sense to change the structure. Previously changing the structure to anything other than an incorporated company would have attracted immediate capital gains tax (CGT).
From 1 July 2016 changing your business structure to e.g. a trust or a partnership instead will also benefit from CGT rollover relief and no longer attract an immediate CGT liability.
So if you think that the sole trader status is no longer working for your business now might be the time to chat to us about a different structure and what it will mean for the future of your business.
Tax on Work Related Electronic Devices
Recognising that it’s not unusual for businesses to provide employees with more than one electronic device, small businesses can now get an exemption from Fringe Benefits Tax (FBT) on multiple devices even if they have similar functions.
Previously this exemption was only available on multiple devices if they performed substantially different functions.
This means if you have provided employees with a laptop and a tablet you can get an FBT exemption for both.
This will be effective from the start of the next FBT year which is 1 April 2016.
