Small Business Measures
2015/2016 Federal Budget
1. Immediate deductibility for professional expenses
The Government will allow businesses to immediately deduct a range of professional expenses associated with starting a new business, such as professional, legal and accounting advice from the 2015-16 income year.
2. CGT roll-over relief for change of entity structure
The Government will allow small businesses to change legal structure without attracting a CGT liability. This measure will be available for businesses that change entity type from the 2016-17 income year. CGT roll-over relief is currently available for individuals who incorporate but all other entity type changes have the potential to trigger a CGT liability
3. Expanding accelerated depreciation for small businesses
The Government will expand accelerated depreciation for small businesses by allowing them to immediately deduct assets they start to use or install ready for use, provided the asset costs less than $20,000. This will apply for assets acquired and installed ready for use between 7.30pm (AEST) 12 May 2015 and 30 June 2017.
4. Accelerated depreciation for primary producers
Currently, the effective life for fences is up to 30 years, for water facilities it is three years and fodder storage assets is up to 50 years. For income years commencing on or after 1 July 2016 the government will allow all primary producers to:
- immediately deduct capital expenditure on fencing and water facilities such as dams, tanks, bores, irrigation channels, pumps, water towers and windmills; and
- depreciate all capital expenditure on fodder storage assets such as silos and tanks used to store grain and other animal feed over three years.
5. Tax cuts for small business
From the 2015/16 income year, the government will deliver a tax cut to all small businesses:
(a) Reduction in company tax rate – The company tax rate will be reduced to 28.5% (i.e., a reduction of 1.5%) for companies with aggregated annual turnover of less than $2 million. Companies with an aggregated annual turnover of $2 million or above will continue to be subject to the current 30% rate on all their taxable income.
NB: the current maximum franking credit rate for a distribution will remain at 30% for all companies, maintaining the existing arrangements for investors, such as self-funded retirees.
(b) 5% discount on tax payable for other taxpayers – Individual taxpayers with business income from an unincorporated business that has an aggregated annual turnover of less than $2 million will be eligible for a small business tax discount. The discount will be 5% of the income tax payable on the business income received by an unincorporated small business entity. The discount will be capped at $1,000 per individual for each income year, and will be delivered as a tax offset.
6. Relaxing the FBT exemption for work-related electronic devices
Currently, an FBT exemption applies in respect of eligible work-related items (e.g., a portable electronic device, an item of computer software, and a tool of trade). In respect of a portable electronic device (e.g., a laptop), the FBT exemption generally does not apply to multiple items provided by an employer to an employee in the one FBT year, where those multiple items have substantially identical functions.
From 1 April 2016, the government will allow an FBT exemption for small businesses that provide employees with more than one qualifying work-related portable electronic device, even where the items have substantially similar functions. It appears that, consistent with the current rules, the FBT exemption will only apply if the relevant item is primarily for use in the employee's employment.
Removing the restriction that a tax exemption is only provided for one work-related portable electronic device of each type will remove confusion where there is a function overlap between different products (such as between a tablet and a laptop).