It is being hailed as one of the best budget’s for Small Business in 20 years…but how does it affect you and what can you take advantage of RIGHT NOW to save your small business TIME and MONEY?
Immediate Deduction for Assets under $20,000
The biggest saving for small business may come in the form of the $20,000 instant write off – but what’s included and what’s not? Here is a simple summary:
- Any business asset that costs less than $20,000
- Assets can be new or used
- The “cost” of the asset includes any costs associated with installing it ready for use
- Assets purchased after 7.30pm on Budget Night (12 May 2015) and up to 30 June 2017
- You can buy an unlimited number of assets and claim the write off on each as long as they are less than $20k each and don’t form part of a “set” to make up one larger, complete asset
- Assets costing over $20,000 including the cost of installation
- Assets purchased before 7.30-pm on Budget Night
- Not available for businesses with a turnover of greater than $2,000,000
So what is the dollar value of this potential tax saving? And how does it correlate to increasing the cashflow in my small business?
In real terms, assuming a Pty Ltd business purchased an asset worth $20,000 the real cashflow benefit of that asset in terms of reduced tax payable works out to be $6,000. In prior years, the immediate deduction was only applicable to assets costing less than $1,000 (a $900 tax saving) so that means a total ADDITIONAL tax benefit of $5,100 for each asset purchased by a corporate entity as a result of the Budget changes.
But BEWARE, whilst the tax benefit is clearly a sweetner for small businesses to go out and spend, don’t make the mistake of buying assets just for the sake of receiving a tax benefit, otherwise you run the risk of overspending and causing a negative effect on business cashflow.
And always remember that when you are buying assets for your business, think about what return those assets are going to give the business. Is the asset going to benefit the business in some way going forward (ie increased cashflow from using the asset)? If not, maybe it’s time to rethink that spending and redirect it to somewhere more worthwhile.
Tax Savings for Small Business
The budget delivered some more good news for small businesses with the company tax rate being reduced by 1.5% bringing it down to 28.5% for businesses that turnover less than $2,000,000.
And for those of you who do not operate through a company the government will introduce a 5% discount on tax payable on business profits to a maximum of $1,000 per individual.
So with the marginal tax rate for companies being reduced to 28.5%, and the maximum individual marginal tax rate staying at 49% there may be some tax saving opportunities open to you.
Increased Benefits for Entity Re-Structure
The government has proposed streamlining the business registration process and announced that business establishment costs will be able to be claimed immediately from 1 July 2016. In addition, small businesses with a turnover of less than $2,000,000 will be able to claim Capital Gains Tax rollover relief to change the legal structure their business operates from.
What a great incentive for businesses looking to take advantage of the new reduced company tax rate or change their structure for asset protection. Call us to take advantage of this.
Simplification of Motor Vehicle Claims
The Government has decided to remove the 12% of original value and 1/3 actual expense methods to calculate motor vehicle claims, and have standardised cents per km claims by making it 66c per km regardless of engine capacity. The log book method though remains untouched.
These changes may have an impact on the way you claim your Motor Vehicles Expenses.
Contact us TODAY if you have any questions or need any further information.April 5, 2015 by Linda
There’s five key things that all business owners MUST consider RIGHT NOW. Please read on!
30 June is only 13 weeks after the beginning of April. It’s not a long time at all. This year let’s try and use all of them.
3 Key Tax Planning Strategies
- Establish a Self Managed Super Fund (SMSF) – How to make it your family’s wealth VAULT and legally pay NIL tax at retirement.
- Trust Distribution Resolutions needed BEFORE 30 June 2015 – or pay up to 49% tax on trust profits.
- General tax planning strategies – Key items that mean $ in your pocket.
How our Tax Planning Process works
First of all, we request from you details of your expected income and business profits for the 2015 tax year (1 July 2014 to 30 June 2015). This includes all wages / employment income, interest and dividends and rental income received, business profits / losses, and any capital gains / losses you expect to make.
Based on this information, we estimate your taxable income and your tax payable BEFORE any tax planning strategies. For example, we may calculate (based on your information) that you may have a taxable income of $100,000 for 2015. This would result in $26,947 tax and Medicare levy payable.
Secondly, we discuss all of your tax planning options.
Third, we provide you with a report that explains in plain English the tax planning strategies we recommend and exactly how much tax you will save.
And finally, we provide you with an easy-to-follow Action Plan to ensure that both you and we can do everything that needs to be actioned before 30 June.
Talk to us TODAY about your Tax Planning requirements!March 5, 2014 by Linda
New credit rating regulations find out who’s been naughty and who’s been good…
Next month, missing a credit card repayment will mean more than a ‘slap on the wrist’ letter in the mail and a possible fine. You’ll also leave yourself open to a nasty black mark on your personal credit rating.
The New Regulations
As of 12 March 2014, loan and credit repayment details are one of five additional pieces of information that lenders can pass on to credit bureaus as part of a new more comprehensive credit reporting regime. Similar to the country rating system, individuals will soon be slapped with a credit rating which financial institutions can use as a quick reference loan check along with other more comprehensive checks.
Know your limits
Be aware of ALL your cards and their limits. Even those ‘emergency cards’ that we keep in the deep dark corners of our purses and wallets. It doesn’t matter whether you have borrowed the full amount or not, it is automatically assumed that you already have. So keep an eye your card limits.
But it’s not all doom and gloom
As opposed to the current system where only negative aspects of a person’s credit history have been taken into account. Under the new regulations you can be rewarded for your years of good behaviour. A few minor defaults which in the past could prevent someone from obtaining a credit card can be outweighed by years of diligence in paying bills on time.
This is the first time Australian have a real incentive to manage their credit
Now is a really great time to assess your credit file and implement a routine to stay on top of your personal finances. You can obtain one free copy of your credit file per year and an additional copy if your loan application is rejected.
Your Credit Do’s and Don’ts
How to get a TOP credit rating:
- Set up Direct Debits to pay off credit cards and personal loans. This safeguards you against circumstances such as holidays or accidents.
- Cancel all credit cards and lines of credit that you are NOT using.
- Make sure you pay something. Pay a smaller amount rather than default if making repayments becomes difficult.
- Check that your credit file is accurate. Even credit bureau’s make mistakes.
How to LOSE a top credit rating:
- Paying debts late. Any payments more than 5 days late may be recorded as a late payment.
- Paying your debts REALLY late. Debts larger than $150 and remain outstanding more than 60 days will be recorded as a default.
- Applying for credit cards and loans that you don’t really need.
- Failing to organise easier payment plans with lenders when repayments become too difficult, will end in default.
An Eye on the future
Although these changes are a massive step for credit bureaus, they are still wanting more information. They are still lobbying to obtain further information on individuals. Credit balances, electricity and even phone bills are on your cards. With post-paid phone bills being among the first young people receive, now is a good time to teach your kids about the importance of managing their finances and their reputation.
For more information on the new regulations, what it will mean for you and other ways you can take control of your credit history, visit www.creditsmart.org.au