Small business tax relief from 2015 Budget – $20,000 Tax Break
Diluk Kalupahana CPA 2nd June 2015
So you want this $20,000 tax break right? Firstly you need to be a small business to apply – Small business is businesses with an annual aggregate turnover of less than $2 million. To be eligible for the tax relief business must be actively trading and purchase must be related to business.
Under the 2015 budget proposal small business can claim 100% tax deductions for any asset purchases under $20,000 until 30 June 2017. This limit is per item and immediate deduction is available for any number of items if the purchase price per item is less than $20,000. There are few items excluded from this concession such as software developed in-house by a business.
Any assets over $20,000 are not eligible for the $20,000 write off and instead can be added together (‘pooled’) and depreciated at the same rate. These assets are depreciated at 15 per cent in the first income year, and 30 per cent per year thereafter.
Before the 7.30 pm on 12 May 2015 immediate asset write-off threshold was at $1,000 and any purchase over $1000 need to depreciated over several years so this is jsut an increase on this $1000 to $20,000 temporarily.
Further 2015 budget proposed to give 1.5 % tax cut to the existing tax rate of 30%. The new tax rate of 28.5 per cent for small business will apply from 1 July 2015. In Australia this is the lowest small business company tax rate since 1967.
Unincorporated businesses, such as sole traders, partnerships and trusts, will also get a 5 per cent tax discount from 1 July 2015 up to $1,000 a year.
Also small business can claim immediate deduction for professional expenses associated with starting a new business such as legal fees, accountant fees etc.
Regarding the GST inclusive or exclusive if business is registered for GST, then the GST exclusive amount has to be less than $20,000.Whereas the entity is not registered for GST, then the GST inclusive amount is has to be less than $20,000 to eligible for the immediate write off.
If you are planning to buy new assets for the existing business or planning to start new business this may be the right time to do so. However have to consider many other factors such as cash flow forecasts, budgets, asset purchases Vs marketing campaign and you should not do the buying only to get the approximately 30% of the purchase back by way of a reduction in tax liability.
However these proposals need to pass by the senate to become a law. – as of today’s date (2nd June 2015) this law is in the parliament being debated and this is based on the currently tabled laws – please realise these laws may not pass – watch this space carefully!
If you need any advice on existing or starting up business please contact us on 1300 627 829 or contact us below
