What’s New from the Government at End of Financial Year?

With the end of financial year looming, we thought it is timely to remind you of the recent changes for small business announced in this year’s Federal Budget. Accelerated depreciation All small businesses are now eligible for an immediate tax deduction for any individual asset they buy costing less than $20,000. This $20,000 limit applies to each individual item and small businesses can apply this $20,000 rule to as many individual items as they wish. This entitlement started on Budget night (12 May 2015) and will continue until the end of June 2017. Any asset over $20,000 can be added together (“pooled”) and depreciated at 15 percent in the first income year and 30 percent per year thereafter. Tax cut for small companies The Government is reducing the tax rate for incorporated businesses with annual turnover under $2 million. The company tax rate for these businesses will be reduced by 1.5 percentage points to 28.5 percent. The tax cut will apply from 1 July 2015, meaning companies with Pay‑As‑You‑Go instalments can benefit from their first payment after 1 July 2015. Tax discount for unincorporated businesses In Australia, most small businesses are not incorporated businesses. Instead they operate as a sole trader, partnership or trust and therefore, do not pay the company tax rate. The Government will also provide a 5 percent tax discount to unincorporated businesses with annual turnover less than $2 million from 1 July 2015. This means individual taxpayers still calculate their business and personal income in the same way and then they get a 5 percent discount on the tax payable on their business income. The discount will be capped at $1,000 per individual in an income year, and it will be delivered as a tax credit in their tax return. There are many opportunities for your small business to benefit from the recent changes from the Federal Budget. Of course, this article does not replace professional advice from your accountant or tax agent. You should seek advice before taking action.