Business Taxpayers
For the purposes of the measures included in the Budget, small businesses are defined as those with an aggregated annual turnover of less than $2m. The budget measures affecting small business are summarised below.
Tax Cuts: Small businesses operating as companies will have their tax rate reduced by 1.5%, from 30% to 28.5%. The current maximum franking credit rate on dividends will remain unchanged at 30%.
Individual taxpayers who derive income from unincorporated small businesses (trusts, partnerships and sole traders) will be eligible for a tax discount (via a tax offset) of 5% of the tax payable on the business income received. This discount will be capped at $1,000 per individual per annum.
Both of the tax cuts will start from 1 July 2015.
Accelerated Depreciation – Immediate Deduction for assets costing less than $20,000: From 7.30pm (AEST) 12 May 2015 until 30 June 2017, small businesses can immediately deduct assets they start to use, or install ready for use, that cost less than $20,000. Previously an immediate deduction was only available for assets costing less than $1,000.
Assets costing $20,000 or more will continue to be placed in the small business simplified depreciation pool and depreciated at existing rates (15% in the first income year and 30% each income year thereafter). However, if the pool balance falls to less than $20,000 (currently $1,000) during the period 12 May 2015 to 30 June 2017, the balance will be deducted immediately.
From 1 July 2017, the thresholds for the immediate depreciation of assets and the value of the pool will revert back to existing arrangements (which are currently based on a ‘less than $1,000’ threshold).
Modernising car expense claim methods: The ‘cents per kilometre method’ will be modernised by replacing the three current (cents per kilometre) rates based on engine size, with one rate set at 66 cents per kilometre (in respect of all cars). The Commissioner will be responsible for updating the rate in following years.
Capital Gains Tax roll-over relief for changes to entity structure: From 1 July 2016, small businesses that alter their legal structure will be permitted to do so without incurring a Capital Gains Tax (CGT) liability. While many small businesses could currently restructure in a manner that does not result in a CGT liability, the changes will allow more small businesses access to the CGT roll-over relief.
Fringe Benefits Tax & electronic devices measures: From 1 April 2016 a Fringe Benefits Tax (FBT) exemption will apply for small businesses that provide employees with more than one qualifying work-related portable electronic device.
Currently, an FBT exemption is only available for multiple devices where each device performs a substantially different function.