2015 Federal Budget Information - Great News for Small Business

Last night the Treasurer Joe Hockey handed down the federal budget and stated, “Our future growth will come from growing small business into big business” There is no doubt that small business was front and centre in this budget that according to the Treasurer, “empowers small business to invest, grow and create jobs.”

Hockey stated, “Small businesses are the engine room of our economy. In 2013-14 there were over 280,000 new small businesses started in Australia. 96% of all Australia’s businesses are small business, employing over 4.5 million people and producing over $330 billion of nation’s total economic output.”

The government claims this is "the biggest small business initiative in our nation’s history" and they propose a range of small business concessions and incentives to add to those already in existence. The definition of ‘small business’ are those that turnover less than $2m and five major announcements to aid small business include:

  1. Asset Write Off and Accelerated Depreciation - from 7.30pm AEST on 12 May 2015 up to 30 June 2017, all small businesses (annual turnover less than $2M) will be permitted to claim an immediate tax deduction on any individual assets purchased that cost less than $20,000.

    This deduction applies on an individual asset basis and there is no limit as to the number of individual assets that the small business can apply this towards. These assets can include coffee machines, office equipment, cars and vans.

    Assets costing over $20,000 can be ‘pooled’ and depreciated at the same rate – being 15% in the first income year and 30% in each subsequent income year. If the value of the asset “pool” is less than $20,000, it can be immediately deducted until the end of June 2017. Most small capital purchases will be eligible for the new threshold, with the exception of assets that have specific depreciation rules, including in-house software and horticultural plants.

    For this same two year period up to 30 June 2017, the Government has suspended the current ‘lock out’ laws for the simplified depreciation rules (which had prevented small businesses from re-entering the simplified depreciation regime for 5 years if they opt-out).

  2. Corporate Tax Rate - from 1 July 2015, the company tax rate for small incorporated businesses (with annual turnover less than$2M) has been cut by 1.5% percentage points, from 30% to 28.5%. However, the franking credit rate remains unchanged at 30% which will provide certainty for investors.

  3. Small Unincorporated Businesses - for small businesses (annual turnover <$2M) that are unincorporated (i.e. the sole traders, partnerships or trusts) they will receive a 5% discount on their tax from 1 July 2015. This discount is viewed to be broadly in line with the 1.5% reduction in the corporate tax rate for such entities that are incorporated. However, this 5% discount will be capped at $1,000 per individual in an income year and provided in the form of a ‘tax credit’ in their income tax returns. Individual taxpayers will still calculate their business and personal income the same way and then they get a 5% discount on the tax payable on their business income.

  4. New Capital Gains Tax Relief - from the 2016-17 income year, a new Capital Gains Tax roll-over relief will be available for small businesses (annual turnover less than $2M) that change their legal structures that do not necessarily involve incorporated entities. This is to assist businesses who might find their initial structure to be unsuitable for their needs when their business becomes more established.

  5. Streamline Business Registrations - from 2014/15, the Government will provide $32.4m over 5 years to allow the ATO, ASIC and the Department of Industry and Science to develop a single online portal for businesses. This will help to streamline the business and company registration process.

Other important issues to note from the budget include:

  • No changes to Superannuation Taxes
  • No changes to Negative Gearing
  • Instant write-off for professional costs associated with starting a new business (legal and accounting fees)

To read more about the budget you can download the IPA Budget Guide from here and our upcoming June newsletter (The Business Accelerator Magazine) will contain more detailed information on these announcements.