How will budget decisions affect you?

How will budget decisions affect you and your business?
The Federal Government made a number of announcements and decisions regarding proposed measures for small business and personal taxation. Below are some of the Government's proposed changes which may be relevant to you, and if you're a business owner, your business. 

What is a small business entity? 

A business is considered a 'small business entity' when turnover (aggregated) is less than $2 million. This includes all gross income or proceeds you earned in the operation of your business for the financial year. Aggregated turnover is the sum of your turnover for an income year and the annual turnover of any entity you are connected with or that is an affiliate of yours at any time during that income year.

Small business

Tax cuts:

  • There will be a 1.5% reduction in the tax rate from the 2015-16 income year onwards which will see the current rate drop from 30% to 28.5% for small businesses operating as a company.
     
  • The current maximum franking credit rate of 30% for the payment of a franked dividend will remain unchanged for all companies.
     
  • A 5% tax discount to unincorporated small businesses will apply from 1 July 2015. The discount will be capped at $1,000 per individual for each income year, and will be provided as a non-refundable tax offset.

Accelerated depreciation:

  • There will be a temporary immediate write-off for the acquisition of capital assets, costing less than $20,000, by a small business. This limit applies to each individual asset.
     
  • Any assets purchased for $20,000 or more can be placed in the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each year after. When the depreciated balance of the pool falls below $20,000 the entire pool will be written off.
     
  • To be eligible for the accelerated depreciation rates, assets need to be used or installed ready for use between 12 May 2015 and 30 June 2017. After this date the immediate write-off will return to the original threshold of $1,000.

FBT exemptions:

From 1 April 2016 the FBT exemption for small business that relates to work-related electronic devices will be extended to allow an employer to provide an employee with more than one device without FBT applying, even if they have substantially similar functions.

Start-up costs:

The Government will allow an immediate deduction for professional expenses associated with starting up a new business, such as professional legal and accounting advice. Changes apply from 1 July 2015.

Primary producers

Accelerated depreciation:

Primary producers will now be able to immediately deduct the cost of fencing and water facilities such as dams, tanks, bores, irrigation channels, pumps, water towers and windmills. There will also be the ability to depreciate over three years the cost of fodder storage assets such as silos and tanks used to store grain and other animal feed.

Personal Taxation

Work-related car expenses:

  • From 1 July 2015, the Government has simplified the deduction for work-related car expenses by abolishing the “12% of original value method” and the “one-third of actual expenses method”.
     
  • There are plans to modify the “cents per kilometre method” by providing a set rate of 66 cents per kilometre for all motor vehicles regardless of engine capacity.
     
  • There will be no change to the “logbook method”.

Salary sacrificed meal entertainment:

  • Effective from 1 April 2016 there will be a cap on FBT meal and entertainment concessions for benefits provided to Not for Profit employees.
     
  • The Government is set to introduce a separate single grossed-up cap of $5,000 for salary sacrificed meal entertainment and entertainment facility leasing expenses. Above the $5,000 and it will be included in the employee’s cap.

Note: Employees of Not for Profit entities include those who work for public benevolent institution, a health promotion charity, a public and Not for Profit hospital, or public ambulance service.

Posted by Michael Prince
<p>Michael is a skilful and savvy <a href="http://www.charteredaccountants.com.au/" target="_blank" title="Visit the Chartered Accountants website">Chartered Accountant</a> and client manager who enjoys applying his technical knowledge to assist clients with a range of tax planning and compliance requirements.</p>