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 small business tax discount for unincorporated businesses will increase from 5% to 8% from 1 July 2016, and continue to rise gradually to 16% in later years.”
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
“The small business entity turnover threshold has been lifted from $2 million to $10 million, giving more small businesses access to key tax concessions.”
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
Small business tax support expanded significantly for unincorporated entities.
The reforms aimed to ease tax pressures and improve cash flow for sole traders, partnerships and other unincorporated structures.
The turnover threshold for accessing many small business concessions increased to $10 million.
This broadened eligibility for tax breaks that previously only very small entities could use.
The small business tax discount for non-companies was increased and scheduled to rise further.
An increase from 5% to 8% (and then up towards 16% in later years) provides ongoing benefit to unincorporated taxpayers on their business income.
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Frequently Asked Questions
What changes did the article outline for unincorporated small businesses?
The article explained that a suite of tax changes was introduced affecting unincorporated small businesses, including a higher small business tax discount and broader access to small business tax concessions.
How does the increased turnover threshold help unincorporated businesses?
Raising the threshold from $2 million to $10 million means more small businesses can claim concessions such as simplified depreciation, simplified trading stock rules, GST accounting on a cash basis and easier PAYG instalments.
What is the small business tax discount for unincorporated businesses?
From 1 July 2016, the tax discount for unincorporated businesses increased from 5% to 8% and was scheduled to phase up gradually to 16% in future years, with a cap of $1,000 per individual each year.
Which concessions became easier to access due to these changes?
Eligible concessions included a lower corporate tax rate (for small entities), instant asset write-off up to $20,000, simplified trading stock rules, capital gains tax relief for restructures, and simplified GST and PAYG instalment options.
Are these changes already in effect?
At the time of the article, the amendments were awaiting royal assent but were expected to be administered and enforced as though they had been enacted, giving businesses early certainty.
When does the CGT relief apply?
The article links the CGT relief specifically to actions taken during the 2016/17 financial year as part of the transition to the new super rules.
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