Tax incentives for small business
The Government announced a range of tax concessions to assist small business entities. Generally, a business is a small business entity if it has business turnover (aggregated turnover) of less than $2 million.
Company tax cuts
A tax cut of 1.5% is proposed to apply to all incorporated small business entities from the 2015-16 financial year. If implemented, this measure will reduce the company tax rate for small business entities to 28.5%.
Importantly, the Government has confirmed the current maximum franking credit rate of 30% will remain unchanged for all companies, maintaining the existing arrangements for investors, such as self-funded retirees.
Unincorporated small business tax cuts
Individual taxpayers with business income from an unincorporated small business will be eligible for a 5% tax discount on income tax payable on business income received from the 2015-16 financial year. The discount will be capped at $1,000 per individual for each income year.
Expansion of accelerated depreciation
Small businesses will be able to claim an immediate deduction on assets that cost less than $20,000 they start to use or install ready for use, between Budget night and 30 June 2017. Assets valued at $20,000 or more can continue to be placed in the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year thereafter.
The Government will also suspend the current ’lock out’ laws for the simplified depreciation rules (these prevent small businesses from re-entering the simplified depreciation regime for five years if they opt out) until 30 June 2017.
From 1 July 2017, the thresholds for the immediate depreciation of assets and the value of the pool will revert back to existing arrangements.
Deduction on professional advice fees relating to establishment of a business
New businesses will be able to claim an immediate deduction on a range of professional expenses associated with starting a business, such as professional, legal and accounting advice. This measure is proposed to apply from 2015-16.
Expenditures on commencement of a business are currently not eligible for immediate deduction as it’s considered an outgoing of a capital nature. Instead, they are currently written off over five years i.e. ’blackhole expenditure’ under section 40-880 of ITAA 1997. This measure will allow more money to be invested in the growth of new businesses.
Capital gains tax roll-over relief for changes to entity structure
From the 2016-17 financial year the Government proposes to allow small businesses to change legal structure without attracting a capital gains tax (CGT) liability at that point. Currently, CGT roll-over relief is available only for individuals who incorporate but all other entity type changes have the potential to trigger a CGT liability.
Fringe benefit tax change for work-related electronic devices
From 1 April 2016 a fringe benefit tax (FBT) exemption will be available to small businesses that provide employees with more than one qualifying work-related portable electronic device, even where the item has substantially similar functions.
This removes confusion in relation to the current rules where an exemption is only provided for one work-related portable electronic device of each type.
Accelerated depreciation for primary producers
From 1 July 2016, the Government will allow all primary producers to immediately deduct capital expenditure on fencing and water facilities, as well as allow primary producers to depreciate over three years all capital expenditure on fodder storage assets such as silos and tanks used to store grain and other animal feed.
Measures to encourage business start-ups and entrepreneurship
In order to encourage business start-ups and entrepreneurship, from 2014-15 the Government will:
- Provide funding to develop a single online portal for business and company registration.
- Publish new computer code to enable developers to build new registration software.
- Reduce the number of business identifiers.
- Provide funding to ASIC to implement and monitor a regulatory framework to facilitate the use of crowd-source equity funding, including simplified reporting and disclosure requirements. This is proposed to apply from 2015-16.
Strengthening of multinational anti-avoidance laws
The Government has announced it will strengthen the multinational anti-avoidance tax laws in an attempt to stop large multinational companies diverting profits earned in Australia away from Australia by using contrived or artificial tax arrangements.
The new law will apply to tax benefits obtained from 1 January 2016 (under both new and existing schemes).
It is proposed that the Commissioner of Taxation will have the power to recover unpaid taxes and issue a fine of an additional 100% of unpaid taxes plus interest. The increase in administrative penalty will apply for the income year commencing on or after 1 July 2015.
Apply GST to off-shore suppliers of digital products and services in Australia
The Government has announced GST will apply to off-shore supplies of digital products and services imported by consumers from 1 July 2017. Currently GST doesn’t apply to cross border supplies and all revenues raised from this measure will go to the States.
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