2015 Budget — Business taxation
The 2015 Australian Government budget includes support for business in the form of a cut to the corporate tax rate for businesses turning over less than $2Million and a tax discount for unincorporated small businesses. Other measures include FBT changes to electronic devices and a new series of tax deductions when setting up a new business.
Accelerated Depreciation —
The Government will significantly expand accelerated depreciation for small businesses by allowing small businesses with aggregate annual turnover of less than $2 million to immediately deduct assets they start to use or install ready for use, provided the asset costs less than $20,000. This will apply for assets acquired and installed ready for use between Budget night and 30 June 2017. Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed in the small business simplified depreciation pool (the pool) and depreciated at 15 per cent in the first income year and 30 per cent each income year thereafter. The pool can also be immediately deducted if the balance is less than $20,000 over this period (including existing pools).
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.
Small businesses can access accelerated depreciation for the majority of capital asset types. Only a small number of assets are not eligible (such as horticultural plants and in-house software). In most cases specific depreciation rules apply to these assets. From 1 July 2017, the thresholds for the immediate depreciation of assets and the value of the pool will revert back to existing arrangements.
Tax Cut For Small Companies —
The Government will cut company taxes by $1.5Billion over the next four years to provide incorporated small business with much needed tax relief. The Government is reducing the tax rate for the more than 90 per cent of 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 per cent. Up to 780,000 incorporated small businesses will be eligible for a tax cut as a result of this initiative.
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.
The franking credit rate will be unchanged at 30 per cent, which means incorporated small business owners will pay less tax, providing certainty for investors such as self-funded retirees.
While the tax rate for companies with a turnover of $2 million or more will remain at 30 per cent, the lower small company tax rate is a first step in the Government’s commitment to deliver taxes that are lower, simpler and fairer through the Tax White Paper.
Tax Discount For Unincorporated Businesses —
Recognising that most small businesses are not incorporated businesses, and they do not pay the company tax rate the Government has provided targeted relief for this type of business. This is aimed at businesses operating as a sole trader, as a partnership or as a trust.
The Government will also provide a 5 per cent tax discount to unincorporated businesses with annual turnover less than $2 million from 1 July 2015. This delivers a tax cut of $1.8 billion over the next four years. This tax cut is broadly in line with the 1.5 percentage point tax cut for small incorporated companies. This means individual taxpayers still calculate their business and personal income in the same way, and then they get a 5 per cent 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.
Immediate Deductibility For Professional Expenses —
The Government will allow businesses to immediately deduct a range of professional expenses associated with starting a new business, such as professional, legal and accounting advice. This measure will be available to businesses from the 2015-16 income year. This measure is estimated to have a cost to revenue of $30.0 million over the forward estimates period. Currently, some professional costs associated with a new business start-up are deducted over a five year period. Allowing start-ups to immediately deduct these expenses will provide much needed cash flow for these new businesses.
Changes to the fringe benefits tax system for work-related electronic devices —
The Government will allow a fringe benefits tax (FBT) exemption from 1 April 2016 for small businesses with an aggregated annual turnover of less than $2 million that provide employees with more than one qualifying work-related portable electronic device, even where the items have substantially similar functions. This measure is estimated to have a small but unquantifiable cost to revenue over the forward estimates period.
Currently, an FBT exemption can apply to more than one portable electronic device used primarily for work purposes, but only where the devices perform substantially different functions.
Removing the restriction that a tax exemption is only provided for one work-related portable electronic device of each type will remove confusion where there is a function overlap between different products (such as between a tablet and a laptop).
This update was issued on 13 May 2015 and please note that changes in circumstances after the publication of material or information may impact upon its accuracy and also change tax compliance obligations. It is recommended that expert advice be sought before taking action based upon the information presented here.
Member Engagement —
ADIA provides leadership, strategy, advocacy and support. Our members set our agenda, fund our activities and directly benefit from the results. With respect to the Association's work to ensure that the initiatives within the 2015 Australian Government budget support the dental industry, the team in the ADIA national office receive advice and guidance from members serving on the ADIA-BAC Business Affairs Committee.
Further Information —
To keep up to date with how ADIA is working to ensure that the Australian Government budget supports the dental industry, subscribe to the Twitter feed @AusDental or follow us on Facebook at www.facebook.com/dental.industry. Alternatively, you can contact the Association via email at email@example.com or by telephone on 1300 943 094.
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