Budget measures for small businesses

Budget measures for small businesses

The Federal Budget was handed down on 3 May. A few days later, the Prime Minister confirmed that we would be heading to a 2 July election, leaving us with a caretaker government until then. In short, this leaves a high degree of uncertainty surrounding the implementation of measures announced in the Budget.

With that said, the Budget did contain some positive news for small businesses, including:

Increase in the Small Business Entity Turnover Threshold

From 1 July 2016, the small business entity turnover threshold is proposed to increase from $2 million to $10 million. This will allow many more businesses to access the $20,000 instant asset write off, reduced small business company tax rate, and the immediate deduction for certain start-up costs.

Importantly, the turnover threshold for small business CGT concessions is not affected by the measures, and remains at $2 million.

To add some confusion, the turnover threshold to access the tax discount for unincorporated entities is proposed to increase to $5 million.

Reduction in the company tax rate for small businesses

The tax rate for companies with turnover under $10 million is proposed to be reduced from 28.5% down to 27.5% from 1 July 2016. Eligibility for this lower rate is proposed to be eased over several years, first allowing access to companies with turnover up to $25 million from 1 July 2017, $50 million from 1 July 2018, and $100 million from 1 July 2019.  Eventually, by 1 July 2026, it is proposed that all companies will be eligible for a flat company tax rate of 25%.

Increase in the unincorporated small business tax discount

Currently unincorporated small businesses with a turnover of up to $2 million receive a 5% tax discount, capped at $1,000 per individual.

The rate of discount is proposed to increase to 8% for the years ended 30 June 2017 through to 30 June 2024, then gradually up to 16% by 2026/27. The discount will be available for unincorporated businesses with a turnover of up to $5 million. The $1,000 cap will be retained.

For more detailed commentary on all the budget measures, the Tax Wrap podcast is worth a listen.

If you have questions about how the proposals might impact you, don’t hesitate to contact us.

Kreston Stanley Williamson Team

*Correct as of May 2016

*Disclaimer – this article has been produced by Kreston Stanley Williamson as a service to its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas contained in this article, it is imperative you seek specific advice relating to your particular circumstances. Liability limited by a scheme approved under professional standards legislation.

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