This year has delivered a surprisingly positive Budget for businesses compared to those of previous years. We welcome this news as a step in the right direction, after all with small businesses employing around 5 million Australians, the positive flow on effects and potential for employment growth are significant.
With many policies announced, including measures to encourage start-ups, the cutting of red tape for small business and FBT exemptions for electronic devices, we have decided to zero in on a couple of key announcements. Read on for everything you need to know about the two most exciting and relevant policies – the tax cuts and write off concessions.
Tax Rates Slashed for Small Businesses
If you’re a company with less than $2M in turnover, expect a 1.5% cut in the tax rate to 28.5% from 1 July 2015. This will benefit 780,000 incorporated small businesses across Australia. As an example of how you could benefit, if your business earns $1.9M per year with a taxable income of $300,000, the tax would fall from $90,000 to $85,500, saving $4,500.
If your business is set up as a sole trader, trust or partnership, you will not be eligible for this 1.5% tax cut. Instead, you will receive a 5% discount (capped at $1,000) on income tax payable on the business income received from an unincorporated small business entity, provided the annual turnover is less than $2M.
Write Off $20K
Small businesses with less than $2M in turnover will also be able to write off assets of less than $20,000, up from $1,000. These assets are defined by the government as ‘capital equipment’, so items like machinery and equipment will become a deduction in their first year rather than spreading these deductions out over the lifetime of the asset.
Once passed as legislation, this will apply to each asset under $20K purchased from 7.30pm on 12 May 2015 until 30 June 2017, so it is wise to start thinking about what will most benefit your business so you can act quickly once this measure is confirmed. Remember it is not restricted to only one purchase worth $20K, but can apply to all assets under $20K, so if you have multiple items in mind take this into consideration.
This measure is a huge boost to not only small businesses needing to invest in equipment, but suppliers who offer equipment from coffee machines to printers and even software. This sector has been stagnant in recent years so they can expect a much needed lift for the next 2 years.