Assistance for unincorporated small business

The following changes affecting small businesses have been recently passed by the federal government in principle and is currently waiting royal assent:

  • The company tax rate will be progressively reduced to 25% over 10 years. Starting from 1 July 2016, the company tax rate for businesses with annual turnover of less than $10m will be reduced to 27.5%.
  • The small business entity turnover threshold will be increased from $2m to $10m from 1 July 2016 for the purposes of accessing certain existing income tax concessions. These concessions are:
    • a lower small business corporate tax rate (which will be reduced to 27.5% from the 2016/17 income year)
    • simplified depreciation rules including the instant asset write off threshold of $20,000 available until 30 June 2017
    • simplified trading stock rules
    • capital gains tax relief for genuine restructures of businesses (ie from a partnership to a company)
    • an option to account for GST on a cash basis and pay GST instalments as calculated by the ATO
    • a 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 available from 1 April 2016 and the immediate deduction of professional expenses.

The increased threshold will not apply for the purposes of accessing existing small business capital gains tax concessions.

  • The small business tax discount for non-companies will increase from 1 July 2016 from 5% to 8%. The offset will also continue to increase in phases over 10 years to 16% (refer table below). The existing cap of $1,000 per individual for each income year will be retained. From 1 July 2016, access to the discount will be extended to individual taxpayers with business income from an unincorporated business that has annual turnover of less than $5m, an increase from the current threshold of $2m.

Income year

Discount rate

2016/17 to 2023/24

8%

2024/25

10%

2025/26

13%

2026/27 and later

16%

 

At present, these legislative amendments are yet to receive royal assent, however, the government has advised that legislation will go through parliament at the next sitting. Consequently, the regulators are to enforce the Bill as if it was enacted.

Our firm would be please to discuss this matter with you further. Please do not hesitate to contact us if you have any concerns relating to your tax.

Norman Ruan
Accountant
T: 02 9984 7774
E: normanr@northadvisory.com.au

Martin van der Saag
Director
T: 02 9984 7774
E: martinv@northadvisory.com.au

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