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What’s in it for you? Fast Facts for Small Business re the 2015 Federal Budget

The Government is attempting to reconnect with many Australians with the recent Federal Budget with Jobs and Small Business package of $5.5 Billion – 90% of which is tax relief, intended to stimulate small business, jobs and offset the slowdown in mining and resources.

Changes that present opportunities for small business include:

1. Accelerated Depreciation – Immediate Write-Off
   Small businesses with aggregate turnover of less than $2 million are able to immediately deduct the costs of assets (cars, vans, kitchens, office equipment, plant, and equipment, etc.) they start to use or install ready for use, provided the asset costs less than $20,000 (previously $1,000) and is acquired prior to 30th June 2017.  Small businesses can apply this $20,000 rule to as many individual items as they like.The government has also announced that it will suspend current “lockout” laws for the simplified depreciation rules until the 30th June 2017.  Currently, these “lockout” rules prevent small businesses from re-entering the simplified depreciation regime for 5 years if they opt out.
2. Tax Cuts For Small Businesses
   The company tax rate will be reduced to 28.5% (a reduction of 1.5%) for companies with aggregated annual turnover of less than $2million.The maximum franking credit rate for a distribution will remain at 30% for all companies thus maintaining the existing arrangements for investors such as self-funded retirees.
3.  5% Discount On Tax Payable For Other Taxpayers
   Individual taxpayers with business income from an unincorporated business (sole trader, partnership) 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 by an unincorporated small business entity.  The discount will be capped at $1,000 per individual for each income year and will be delivered as a tax offset.
4. Car Expense Deductions
   The government has announced that two of the methods available to taxpayers to calculate work-related motor vehicle expenses deductions will be removed.  These are the 12% of original value method and the 1/3 of actual expenses method.The cents per kilometre method will be changed by replacing the 3 current cents per kilometre rates based on engine size, with one rate set at 66 cents per kilometre, which will apply to all types of cars, irrespective of engine size.
5. Deduction of Expenses On Commencing A New Business
   The Government will allow businesses to claim an immediate tax write-off for a range of professional expenses associates with starting a new business, such as professional, legal and accounting advice.
6. Fringe Benefits Tax
   From 1 April 2016, the government will relax the Fringe Benefit Tax exemption for work-related electronic devices.
7. Capital Gains Tax Rollover Relief for Changes to Entity Structures
   Capital gains tax rollover relief is currently available for individuals who incorporate.  However, other entity type changes have the potential to trigger a capital gains tax (CGT) liability.The government will allow small businesses with an aggregate annual turnover of less than $2 million to change legal structure without attracting a CGT liability at that point.
8. Entrepreneurs’ Infrastructure Program
   The Entrepreneurs’ Infrastructure Program will have a budget allocation of $526 million over the next four years. Contact us to see what this might mean for you.

With the 2015 Financial Year fast approaching many of you will be in tax planning mode and we encourage you to understand what opportunities might offer you. In addition, it might be worth considering the upside from the tax relief and the opportunity to possibly restructure to an entity that may produce greater flexibility, asset protection and provide more options under any exit or succession.

To read more on the details we attach further information here for the 2015 Federal Budget.

written by:

McKinley Plowman