Tax rate cut for small business
Companies with an aggregated annual turnover of less than $2m (Small Business) will be taxed at a concessional rate of 28.5% from the 2015/16 income year. Interestingly, the maximum franking credit rate for distribution will remain unchanged at 30%, which will enable Small Business to still provide a fullyfranked dividend carrying a 30% credit.
Further, individual taxpayers with business income from an unincorporated business with an aggregated turnover of less than $2m will be able to access a tax discount of 5% of income tax payable from 2015/16. The discount will be capped at $1,000 per individual and will be provided as an offset.
CGT rollover relief for alteration of Small Business structure
Small Businesses that change entity types from the 2016-17 year onwards (e.g. from a trust to a company, or partnership to a trust etc), will not attract any CGT liability arising from such an alteration. Currently, CGT relief is broadly only available for individuals or partnerships that rollover their assets to a company. This is a welcome change for startups which may not always have the resources to take appropriate tax and legal advice in the early stage of the business life-cycle.
Upfront deduction for assets less than $20,000
The threshold at which Small Business will be able to obtain an upfront deduction for assets will temporarily increase from $1,000 to $20,000 for assets acquired and installed ready for use between 7.30pm 12 May 2015 and 30 June 2017. These measures exclude horticultural plants and in-house software. Further, this measure will also temporarily suspend rules preventing Small Business from re-entering the simplified depreciation regime for five years if they opt out.
It is expected that this very generous measure will result in a significant increase in capital expenditure for Small Business.
Fringe benefit tax exemption for work-related electronic devices
An existing fringe benefit tax (FBT) exemption relating to provision of portable electronic devices used primarily for work purposes will be expanded for Small Business, to cover devices even where they have similar functions (e.g. tablets and laptops).