Joe Hockey has presented his Coalition budget yesterday announcing some good news for small businesses including a $5.5 billion stimulus package to allow people to “have a go”. The new budget is aimed at boosting productivity and economic growth allowing small businesses to transform into large businesses. I will focus on areas which will provide benefit to our clients.
The most surprising measure was the immediate write-off for depreciable assets costing less than $20,000 increased from $1,000. This is to take effect from 7.30pm budget night through to 30 June 2017.
Decrease in the company tax rate from 30% to 28.5% from 1 July 2015 for companies with a turnover under $2 Million. Large companies continue to pay 30%. Interestingly for companies already in existence with franked retained earnings this will cause dilution in the value of franking credits. This means that a $30 franking credit will be work $28.50 from 1 July 2014. It may be time to clear out those Division 7A loans or clear out preceding profits.
For businesses not in a company structure unincorporated businesses such as Sole Traders or contractors will receive a 5% tax discount on income from their business. This is capped at $1,000 benefit per year.
FBT Exemption for work related portable electronic devices such as mobile phones, laptops and tablets, is being abolished from 1 April 2016. This is aimed to help businesses stay up to date with new technology in the digital age.
The budget has allowed the immediate write-off of expenses in connection with establishing a company, trust or partnership, rather than writing them off over five years. This includes costs like the legal and accounting fees incurred when establishing a new business.
Effective from the 2016-17 income year, the government is allowing businesses to change their legal structure without triggering a CGT (Capital Gains Tax) Event.
This will allow businesses which have outgrown their legal structure after a number of years to rollover into a new structure. This concession is available to business with less than $2 Million turnover and there must be no change to the ownership.
Struggling farmers will be given a total of $300 million for drought assistance and will also be provided with tax breaks for spending on water facilities, fodder storage and new fencing.
Overall there is some great perks on the cards for small businesses which we are all excited about. Let’s just hope they all make it through the senate.