In a move that has been well received across the business community, the Government has introduced a number of measures to help small business. As the biggest generators of employment in Australia, giving small business a boost is designed to kick start the Australian economy as it struggles to transition from the mining boom.
The measures look like being passed through parliament and have been summarised below.
- The Government will provide a tax cut of 1.5% for all small businesses with a turnover of less than $2m- effectively dropping the company tax rate to 28.5%. Over 96% of businesses in Australia will benefit from this measure. In addition, small unincorporated businesses will get a 5% tax discount up to $1,000 a year.
- Small businesses will also be able to immediately claim a tax deduction for an asset costing less than $20,000 purchased between budget night and June 30, 2017. In addition, assets valued at $20,000 or more can continue to be placed in the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% thereafter. The pool can also be immediately deducted if the balance is less than $20,000 over this period (including existing pools). These measures save businesses having to write assets down over a number of years – this is a great initiative as in any small business, cash flow is the number one concern.
- A new Fringe benefits Tax (FBT) exemption has been introduced from April 2016 for small business with a turnover of less than $2m. The exemption applies where an employer provides employees with more than one qualifying work-related portable electronic device e.g. a tablet or iPad.
- The Government is looking to encourage start ups by giving an immediate deduction for professional expenses when starting a business, such as legal expenses on setting up a company, trust or partnership. This is opposed to having to write them off over 5 years. There are other measures to streamline the registration of a new business, as well as removing obstacles to crowd sourced equity funding to increase access to finance.
- The ability for small businesses to change entity structure has also been made easier – such as switching from a sole trader to a trust – without getting hit with capital gains tax.
Anyone who is in small business should already be factoring in some of these measures into their end of financial year planning.
Rob Gilmour is the Managing Principal of Wealth Simplicity. The information provided should not be considered personal financial advice as it is intended to provide general advice only. The content has been prepared without taking into account your personal objectives, financial situations or needs. You should seek personal financial advice before making any financial or investment decisions.