19 May 2015 Federal Budget Summary
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.