16/04/2015

The centrepiece of the Budget was a Growing Jobs and Small Business package to assist small businesses.

Broadly, small businesses with an aggregated annual turnover of less than $2 million will be eligible for the following concessions:

Small Business Tax Cuts

The Government will deliver a tax cut to all small businesses through:

  • a 1.5%  tax cut for small companies, and
  • a 5% discount on tax payable on income from unincorporated small businesses.

These tax cuts will be available from the 2015‑16 income year.

28.5% Tax Rate for ‘Small’ Companies

The Government will reduce the company tax rate from 30% to 28.5% for small companies with an aggregated annual turnover of less than $2 million. Companies with an aggregated annual turnover of $2 million or above will continue to be subject to the current 30% rate on all their taxable income.

Importantly, the current maximum franking credit rate for a distribution will remain unchanged at 30% for all companies, maintaining the existing arrangements for investors, such as self‑funded retirees.

5% Discount on Tax Payable by Unincorporated Small Businesses

Individual taxpayers with business income from an unincorporated business that has an aggregated annual turnover of less than $2 million will be eligible for a small business tax discount.

The discount will be 5% of the income tax payable on the business income received from an unincorporated small business entity.

The discount will be capped at $1,000 per individual for each income year, and delivered as a tax offset.

Temporary Accelerated Depreciation for Small Business Assets costing less than $20,000

The Government will significantly expand accelerated depreciation for small businesses by allowing small businesses with aggregate annual turnover of less than $2 million to immediately deduct assets they start to use or install ready for use, provided the asset costs less than $20,000 (currently, an immediate write-off is generally available for assets costing less than $1,000).

This measure will apply for assets acquired and installed ready for use between 7.30pm (AEST) 12 May 2015 and 30 June 2017.

The Government also announced that it will suspend the current 'lock out' laws for the simplified depreciation rules until 30 June 2017.  The ‘lock out’ rules prevent small businesses from re‑entering the simplified depreciation regime for five years if they opt out.

Assets valued at $20,000 or more (which cannot be immediately deducted) will continue to be placed in the small business simplified depreciation pool (the pool) and depreciated at 15% in the first income year and 30% each income year thereafter.

The pool can also be immediately deducted if the balance is less than $20,000 over this period (including existing pools).

From 1 July 2017, the thresholds for the immediate depreciation of assets and the value of the pool will revert back to existing arrangements.

Immediate Deduction for Professional Expenses

The Government will allow businesses to immediately deduct a range of professional expenses associated with starting a new business, such as professional, legal and accounting advice.

Currently, some professional costs associated with a new business start-up are deducted over a five year period.

This measure will apply from the 2015‑16 income year.

CGT Roll‑over Relief for Changes to Entity Structure

From 1 July 2016, small businesses with an aggregated annual turnover of less than $2 million will be allowed to change their legal structure without attracting a CGT liability at that point.

CGT roll‑over relief is currently available for individuals who incorporate but all other entity type changes have the potential to trigger a CGT liability.  This measure recognises that new small businesses might choose an initial legal structure that they later find does not suit them when the business becomes more established.

FBT Changes for Work‑related Electronic Devices

Currently, an FBT exemption under S.58X of the FBT Act applies in respect of eligible work-related items (e.g., a portable electronic device, an item of computer software, and a tool of trade). In respect of a portable electronic device (e.g., a laptop computer), the FBT exemption generally does not apply to multiple items provided by an employer to an employee in the one FBT year, where those multiple items have substantially identical functions.

From 1 April 2016, the Government will allow an FBT exemption from 1 April 2016 for small businesses with an aggregated annual turnover of less than $2 million that provide employees with more than one qualifying work‑related portable electronic device, even where the items have substantially similar functions.

According to the Government, the proposed change will remove confusion where there is a function overlap between different products (such as between a tablet and a laptop).