2016/17 tax year - tax changes for small business
As 30 June 2017 is fast approaching, we would like to advise of some key tax changes that your business may be in a position to take advantage of before the end of the financial year.
Change in thresholds for small businesses
During the year, the aggregated turnover threshold for small business entities was changed from $2m to $10m. For your business, the following changes can apply to your income tax calculation:
- the lower small business corporate tax rate (27.5% for the 2016/17 tax year)
- immediate deductibility for small business start-up expenses
- simplified depreciation rules (low value pools), including the instant asset write off threshold of $20,000 available until 30 June 2017
- simplified trading stock rules
- option to account for GST on cash basis and pay GST by instalments
- simplified method of paying PAYG instalments calculated by the ATO, and
- other tax concessions such as the extension of the FBT exemption for work-related portable electronic devices from 1 April 2016.
The increased $10m threshold will not be applicable for accessing the small business capital gains tax concessions.
“During the 2016/17 tax year the aggregated turnover threshold for small business entities was increased from $2 million to $10 million, giving more businesses access to key small business tax concessions.”
Franked dividends
The imputation system for corporate tax entities will now be based on the company’s corporate tax rate for a particular income year. This is worked out in regard to the entity’s aggregated turnover for the previous income year.
Therefore, with the change in the definition of small business above, an entity with between $2m and $10m in the 2015/16 income year can fully frank a distribution based on the tax rate of 27.5%.
Simpler BAS
Small businesses will have a simpler BAS after 1 July 2017. After this date, a small business (under $10m) will only need to report the following on a BAS:
- GST on sales (1A)
- GST on purchases (1B), and
- Total sales (G1).
If you have any concerns about how these changes will affect you, or about other matters relating to your tax, please do not hesitate to contact our office.
Martin van der Saag
Director
T: 02 9984 7774
E: martinv@northadvisory.com.au
Norman Ruan
Accountant
T: 02 9984 7774
E: normanr@northadvisory.com.au
“Small businesses can take advantage of a lower corporate tax rate (27.5%), simplified depreciation rules including an instant asset write-off of $20,000, and other simpler reporting options before 30 June 2017.”
About the author
Cayle Petritsch - Director & Wealth Advisor
Cayle Petritsch, Director and Wealth Advisor, works with our existing clients who have recognised the importance of business owners making strategic financial choices not only for their company, but for their personal finances too.
Cayle saw a great opportunity to expand North Advisory’s services into SMSF/superannuation, personal wealth management, asset protection services and other crucial personal finance facets that business owners need to consider.
His approach to wealth management allows you to receive highly personalised wealth advice. Working closely with Marius, Cayle understands the unique needs of every client, from their lifestyle and business goals to their retirement plans.
Key Takeaways
The small business aggregated turnover threshold was significantly raised to $10 million for 2016/17.
This expanded eligibility for a suite of tax concessions to a larger number of small businesses.
A reduced corporate tax rate of 27.5% applied to eligible small business entities in the 2016/17 year.
Small businesses could benefit from a lower tax rate compared with the standard company rate.
Simplified depreciation rules — including an instant asset write-off — helped small businesses invest in assets.
Eligible assets costing up to $20,000 could be immediately written off when acquired before 30 June 2017.
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Frequently Asked Questions
What was the new small business turnover threshold for the 2016/17 tax year?
For the 2016/17 income year, the aggregated turnover threshold for small business concessions increased from $2 million to $10 million, meaning more businesses could access small business tax benefits.
What lower company tax rate applied to small businesses in 2016/17?
In the 2016/17 tax year, eligible small business corporate entities could pay a lower company tax rate of 27.5% on their business income.
Were there changes to depreciation rules for small businesses?
Yes — small businesses could use simplified depreciation rules, including access to an instant asset write-off threshold of $20,000 for qualifying business assets acquired before 30 June 2017.
Could small businesses simplify their GST and BAS reporting in 2016/17?
Yes — small business entities could account for GST on a cash basis, pay GST by instalments, and prepare a simpler Business Activity Statement (BAS) with reduced reporting fields.
What other tax concessions were available to small businesses in 2016/17?
Additional concessions included immediate deductibility for small business start-up expenses, simplified trading stock rules, and an extension of the FBT exemption for work-related portable electronic devices.
What GST and PAYG simplifications were available to small businesses?
The article explains small businesses could choose options like GST cash basis, paying GST by instalments, and a simplified PAYG instalments method calculated by the ATO.
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