While there will always be those who are unhappy with any budget, the general consensus is that the Abbott Government’s 2015 budget is a lot more friendly to low and middle-income earners – and small businesses – than the 2014 version. Here are some of the major changes for small businesses (with an aggregated annual turnover of less than $2 million) that are scheduled to occur over the next 14 months.
The already-implemented benefit for small businesses sees a key change to the depreciation rules to allow an immediate deduction of assets purchased for less than $20,000 between the budget being released (May 12 at 7:30pm) and June 30, 2017 (the previous immediate write-off was for assets under $1,000, with larger assets being written off over several years). This will provide small businesses with the opportunity to greatly accelerate their depreciation expenses, thereby reducing their taxable income.
The government is also suspending the ‘lock-out’ laws that prevented small businesses from returning to the simplified depreciation pool (where assets are combined into a pool and depreciated as a whole, rather than having to calculate individual depreciation amounts for each item) for five years if they choose to opt out. This suspension is in place until June 30, 2017 so if you have previously opted out and want to return to using the depreciation pool, you will now be able to do so.
Due to take effect at the beginning of the 2015/2016 financial year are tax cuts specifically for small businesses, both incorporated (1.5% tax cut off the current 30%) and unincorporated (5% discount on income tax payable, delivered as a tax offset and capped at $1,000 per individual per income year).
Other changes that will impact small businesses include:
Effective July 1, 2015
- Updating car expense deductions: The process will be simplified, with two of the four methods (12% of original cost and one third of actual expenses) being scrapped and the cents per kilometre method changing from three rates for cars (relating to engine size) down to one – 66 cents per kilometre.
- Allowing immediate deductions for professional costs to start a new business: some costs that have previously been deducted over five years can be written off immediately.
Effective July 1, 2016
- CGT roll-over relief for businesses changing entity structure: expanded to include all entity type, rather than just businesses incorporating, as is currently the case. This will allow small businesses to a more suitable structure without attracting potentially large CGT liabilities.
In the coming weeks, I’ll be examining some of the most significant budget announcements in more detail – both for businesses and individuals.
By Jennifer Lowe