The Government has extended some key existing concessions introduced in the 2016-17 Budget for Australian small businesses. By doing so, the Government is maintaining its position on easing the tax burden for small business.

Tax Integrity Package – improving the small business capital gains tax concessions

Access to small business capital gains tax (CGT) concessions will be restricted from 1 July 2017 to those assets used in the small business or ownership interests in the small business.

The CGT concessions will continue to be available to small businesses with:

  • aggregated turnover of less than $2 million; or
  • total business assets valued at less than $6 million.

These amendments are intended to improve the integrity of the tax system by ensuring the appropriate availability of the concessions. These concessions allow small business owners to re-invest and grow while enabling relief from CGT on business related assets. The changes are intended to restrict taxpayers accessing concessions on assets which are unrelated to small businesses.

Extending the immediate deductibility threshold for small businesses

The 2015-16 Budget measure allowing the tax deduction for eligible asset purchases less than $20,000 will be available for a further 12 months for small businesses with an aggregated annual turnover of less than $10 million. In order to validly deduct eligible assets, they must be used, or installed for use, by 30 June 2018. Only a few assets are ineligible, such as in-house software and horticultural plants.

Similarly, assets with a value greater than $20,000 can continue to be placed into the small business simplified depreciation pool, allowing them to be depreciated by 15% in the first year and 30% in each subsequent year. Rules preventing small businesses which have opted out of the simplified depreciation regime from re-entering for five years (‘lock-out’ rules), will continue to be suspended until 30 June 2018.

Reduced corporate tax rate for larger businesses in accordance with the 10-year package

Measures forming part of the 10-year package introduced in the 2016-17 Budget to reduce corporate tax rates continue, meaning that businesses with an aggregated turnover of less than $25 million will see the reduced corporate tax rate of 27.5% from 1 July 2017, joining those businesses with an aggregated turnover of less than $10 million to whom the rate applied from 1 July 2016.

The 10-year plan to reduce the corporate tax rate to 25% for companies with an aggregated turnover of less than $50 million by 2026-27 turnover remains unchanged.