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.

We are a Brisbane based accounting firm.

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