• Cecilia Chen

Business taxation changes

Lately, the number of small businesses have been on the rise. Thus, the legislation regarding small businesses has been changing to better suit these businesses. Effective from 1 July 2016, the few key changes that benefit small businesses are:

  1. lower company tax rate changes

  2. instant asset write-off on depreciation

  3. expanded access to small businesses concessions

  4. increased small business income tax offset

1. Lower Company Tax Rate Changes

Firstly, for 2016-2017 income year, company tax rates have decreased to 27.5% from 28.5%, and is applicable to small businesses that have a turnover less than $10 million and operates for 12 full or partial months of the income year. The maximum franking credit that can be allocated to a frankable distribution has also been reduced to 27.5% for these companies.

Secondly, from 2017-2018 income year onwards, a base rate entity is also eligible for the decreased company tax rate of 27.5% and other small business tax concessions, only if it is a small business entity.

A base rate entity is a company that:

  • has a turnover less than $25 million i.e. the turnover threshold for 2017-2018 income year, and

  • operates for 12 full or partial months of the income year

By 2018-2019 income year, the revised company tax rate will progressively apply to all base rate entities with a turnover less than $50 million. From 2024-2025, company tax rate will reduce each year until it is 25% by 2026-2027.

2. Instant Asset Write-offs on Depreciation

Another benefit of the revised legislation is that the instant asset write-off threshold of $20,000 has been extended until 30 June 2018. Small businesses can immediately deduct the business portion of most assets (both new and second-hand) that cost less than $20,000 each if it was purchased;

  • between 1 July 2016 and 30 June 2018, with a turnover is less than $10 million

  • between 12 May 2015 7.30pm and 30 June 2016, with a turnover less than $2 million

This deduction can be claimed through the tax returns in the year the asset was first used/installed ready for use.

3. Expanded Access to Small Businesses Concessions

A range of small business tax concessions is available to all businesses with turnovers less than $10 million, effective from 1 July 2016. This $10 million turnover threshold applies to most concessions except for:

  • the small business income tax offset, which has a turnover threshold of $5 million

  • capital gains tax (CGT) concessions, which has a turnover threshold of $2 million

Fringe benefits tax (FBT) turnover threshold has also increased to $10 million, effective from 1 April 2017.

4. Increased Small Business Income Tax Offset

Small business sole traders or persons who have a share of net small business income from a partnership or trust can claim small business income tax offset.

The increased small business income tax offsets of 8% (with a limit of $1,000 each year) is applicable to small businesses with turnovers less than $5 million, effective from 2016-2017 income year. The rate increased by 3% from 5% in the previous years. The tax offset will continue to increase to 10% in 2024-2035, 13% in 2025-2026 and 16% in 2026-2027 income year.

Please do not hesitate to contact us if you have any queries.

#CompanyTaxchanges #Businessturnover #Instantassetwriteoff

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The Great Bean Counters are Registered Tax Accountants offering accounting services to Brisbane’s Western Suburbs including but not limited to: Moggill, Chapel HillKenmore, Fig Tree Pocket, Indooroopilly, Upper Brookfield, Brookfield, Pullenvale, Pinjarra Hills, Bellbowrie, Anstead, Mount Crosby, Kholo, Kenmore HillsKarana Downs, Indooroopilly, Taringa and Toowong.

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