Small Business Tax Concessions – Don’t Miss Out

Small Business Tax ConcessionsSmall business

While this list of small business tax concessions & deductions below is not exhaustive – we’ve picked the points as relevantones  to most small businesses. If you’re unaware of what anything below means, please feel free to contact Marsh Tincknell Accountants for a free consultation. Small businesses can immediately deduct the business portion of most assets if they cost less than $20,000 and were purchased between 7:30pm on 12 May 2015 and 30 June 2017. This deduction can be used for each asset that costs less than $20,000 – whether new or second-hand. You claim the deduction through your tax return, in the year the asset was first used or installed ready for use.

Deductions for Professional Expenses for Start-Ups

From 1 July 2015, small businesses are entitled to certain deductions for start-up costs. The range of deductible start-up costs includes professional, legal and accounting advice regarding the proposed structure of a new business. Also government fees and charges – for example costs associated with creating an entity such as a company to operate the business or stamp duty on transfer of assets to the entity operating the new business. Sourced from the ATO – Link Here

Small Business Restructure Rollover

From 1 July 2016, small businesses will be able to change the legal structure of their business without incurring any income tax liability when active assets are transferred by one entity to another. This rollover applies to active assets that are CGT assets, trading stock, revenue assets and depreciating assets used, or held ready for use, in the course of carrying on a business. This brand new legislation allows many small businesses to move into a more appropriate legal structure without incurring a tax cost. Sourced from the ATO – Link Here

Small Business Sale – Capital Gain Concessions Available

Whether you have a small business or a large business it is essential to seek advice prior to the sale of your business to get the best tax outcome. There are several options available to small businesses as follows: In addition to the exemptions and rollovers available more widely, the following concessions may allow you to disregard or defer some or all of a capital gain from an active asset used in a small business:

The concessions are available when you dispose of an active asset and any of the following apply:

  • you’re a small business (that is, have an aggregated annual turnover of less than $2 million)
  • your asset was used in a closely connected small business
  • you have net assets of no more than $6 million (excluding personal use assets including your home to the extent that it has not been used to produce income

The concessions can also apply when you dispose of shares in a company or units in a trust that meet certain criteria. You can apply as many concessions as you are entitled to until the capital gain is reduced to nil. There are rules about the order in which you apply the CGT small business concessions, any current year or prior year capital losses and the CGT discount. Sourced from the ATO – Link Here

Company Tax Cut for Small Business

Currently, there is a small business corporate tax rate which is less than the headline corporate tax rate. Companies with an aggregated annual turnover below $2 million are taxed at 28.5 per cent. Companies with an aggregated annual turnover of $2 million or above are generally taxed at 30 per cent. The government announced a reduction in the small business tax rate from 28.5 per cent to 27.5 per cent for the 2016-17 income year. The turnover threshold to qualify for the lower rate will start at $10 million and progressively rise until the 27.5 per cent rate applies to all corporate tax entities subject to the general company tax rate in the 2023-24 income year.

Year Aggregated Annual Turnover Threshold Entities under the Threshold Other Corporate Tax Entities
2015-2016  $2m 28.5% 30.0%
2016-2017 $10m 27.5% 30.0%
2017-2018 $25m 27.5% 30.0%

Sourced from the ATO – Link Here

Changes to FBT – Small Business

Subject to the limitations below, a number of employee benefits are exempt from fringe benefits tax (FBT), including the following work-related items:

  • Portable electronic devices such as mobile phones, laptops, tablets, portable printers and GPS navigation receivers
  • Computer software
  • Protective clothing
  • Briefcases
  • Tools of trade.

The FBT exemption is limited to:

  • Items primarily for use in the employee’s employment
  • One item per FBT year for items that have a substantially identical function, unless the item is a replacement item.

From 1 April 2016, the exemption extends to small businesses that provide employees with more than one work-related portable electronic device in an FBT year – even if the devices have substantially identical functions. For example, laptop or phones or iPads etc. You must be a small business for at least one income year that starts or ends in the relevant FBT year. Sourced from the ATO – Link Here