How the new federal budget will effect small businesses.

May 19, 2015

As expected the new federal budget has generated much talk around the individual budget announcements and how it will affect you as a tax payer. This year the government has highlighted a focus on supporting small businesses by introducing some great initiatives. Companies that have a turnover of under $2m per annum represent over 95% of Australian businesses which means that approximately three quarters of small business owners could benefit from the reform.

The small business package (total cost of $5.5billion) will include:

  1. A tax cut from 30% to 28.5% for incorporated businesses – this means that 1.5% can be reinvested back into existing businesses to employ new staff, upgrade equipment etc.
  2. A 5% discount on the tax payable by unincorporated businesses (sole partnerships or trusts) on business income. The discount is capped at $1000 per year and is delivered as a tax offset.
  3. An immediate tax deduction on individual assets costing less than $20,000. This initiative will be very beneficial to business owners who have been looking to upgrade or update. Eg A café owner looking to purchase new plan equipment could immediately claimed the deduction. Tradies could look at new tools or a payment on a utility for a vehicle.
  4. Small businesses that keep the same owners but might benefit from changing their legal form will be allowed to do so from 2016-2017 without triggering capital gains tax. Instead they can get rollover relief on the capital gains tax.
  5. If shares are given to employees as part of an incentive package they can now be deferred and tax is not actually payable until shares are actually sold.
  6. There will be funding for ASIC to develop new rules that will support crowd source funding which is good for innovation and marketplace.
  7. Fringe benefit taxes on portable devices such as tablets, laptops and phones will be abolished.

Overall these are really good outcomes that will encourage the growth of small businesses, business investment and increase current employment rates. NAB have provided an in depth analysis of the budget announcements which can be viewed at: