Current as of May 2015
With a number of key measures announced over the last few weeks, there were very few surprises in the Budget handed down last night. There’s plenty of coverage in the newspapers, so we will try not to bore you by repeating what you have already read. Instead, we’d like to just highlight a few of the key changes that will impact many of our clients, as well as help you to take full advantage of them.
Small businesses (basically those with group turnover of less than $2m) are the winners in this Budget. They will benefit from:
Between now and 30 June 2017, small businesses can:
- claim an immediate deduction for assets they buy that cost less than $20,000 (up from the current threshold of $1,000)
- write-off and claim an immediate deduction for their small business simplified depreciation pool if its balance drops below $20,000
These thresholds will revert to $1,000 from 1 July 2017.
This measure applies from now, so in the lead up to 30 June you should carefully consider bringing forward any planned capital expenditure of up to $20,000 per item. For a company that is a small business, a $20,000 deduction in the 2015 financial year will save you $6,000 in tax.
Tax Cuts from 1 July 2015
The company tax rate for small businesses will be cut from 30% down to 28.5%. This rate cut has been previously announced, but the impact of the change on franking of dividends has now been clarified with the announcement that the current maximum franking credit rate for a dividend will remain at 30%.
Individuals with business income from unincorporated businesses will receive a 5% discount on income tax payable on their business income. The discount will be capped at $1,000 per individual.
Year end tax planning becomes even more important in years where tax rates change. You should contact us as soon as possible if you’d like us to help with this.
CGT Roll-Over Relief for Changes to Entity Structure
From 1 July 2016, small businesses can change their legal structure without CGT ramifications. There is already roll-over relief allowing certain entities to incorporate. The proposed new rules will provide relief to structure changes involving other entity types (e.g. individual or company rolling over to family trust).
Note that the existing Small Business CGT Concessions also continue to be available for these types of entity structure changes, and in some circumstances might provide a better outcome.
The new roll-over relief should provide some flexibility for small businesses who have found that their initial structure no longer suits them. It will, however, continue to be prudent to discuss any proposed change with us to make sure you are aware of your options and the implications of them.
From 1 July 2015, individuals will no longer be able to claim car expenses using the ‘one-third of actual expenses method’ or the ‘12% of original value method’. At the same time, the rate applying to the ‘cents per kilometre method’ will be set at a single rate of 66 cents per km regardless of engine size. (Note that the rates that currently apply are from 65 cents per km for an engine size of up to 1600cc, up to 77 cents per km for engines over 2600cc).
This change will result in lower deductions for work related car expenses. If you want to claim car expenses in the 2016 financial year, it would be wise to make sure you’re keeping appropriate records, including maintaining a log book for a 12 week period. The ATO provide guidance on log books here.
These are the areas which will be of most relevance to small business owners. Over the last few months there were some whispers that there would be changes to superannuation rules. For now they remain the same. You can now confidently do your tax planning running up to 30 June. If you have any queries don’t hesitate to contact us.
This newsletter has been produced by Stanley & Williamson as a service to its clients and associates. The information contained in the newsletter is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas contained in this newsletter, it is imperative you seek specific advice relating to your particular circumstances. Liability limited by a scheme approved under Professional Standards legislation.