Parliament announced the budget changes last night 12th May 2015 with some exciting news for many small business owners.
CHANGES EFFECTIVE 7:30pm 12th MAY 2015 UNTIL 30 JUNE 2017
- Accelerated depreciation for small business is back.
Allowing small businesses with aggregate annual turnover of less than $2 million to immediately claim a tax deduction in the year they start to use or the item is installed ready for use, provided the asset costs less than $20,000 net of GST (currently, an immediate write-off is generally available for assets costing less than $1,000).
This will apply for assets acquired and installed ready for use between 7.30pm (AEST) 12 May 2015 and 30 June 2017. From 1 July 2017 the limit will revert back to the existing $1,000 threshold.
CHANGES EFFECTIVE 1 JULY 2015
- Tax rate cuts for small business
If aggregated annual turnover of less than $2 million the following apply;
(a) Company tax rate reduced by to 28.5% (currently 30%)
(b) Non company entities get 5% offset on tax payable up to $1,000 per individual
- Claiming car expense stream lined
Individuals & partnerships can currently claim car expenses by 4 different methods. This is being reduced to 2; log book & cents per kilometre. Furthermore the cents per kilometre method will be changed to one rate of 66cents instead of the old system based on engine size.
- Immediate deduction for professional expenses on commencing a new business
Currently professional fees such as legal & accounting advice for starting a new business are deducted over a 5 year period. Changes will allow an immediate deduction.
CHANGES EFFECTIVE 1 JULY 2016
- CGT roll-over relief for changes to entity structure
Currently if an individual decides to incorporate their business there is no CGT consequence, but changes to other entity types trigger a potential CGT event. The changes will allow small businesses with aggregated annual turnover of less than $2 million to change legal structure without a triggering CGT event. Introduced to recognise that the initial structure chosen by a business may not suit it once fully established.
- Accelerated depreciation for primary producers
Currently the effective life for fences is up to 30 years, water facilities is three years and fodder storage assets is up to 50 years. Changes will allow all primary producers to:
(a) immediately deduct capital expenditure on fencing and water facilities such as dams, tanks, bores, irrigation channels, pumps, water towers and windmills; and
(b) depreciate all capital expenditure on fodder storage assets such as silos and tanks used to store grain and other animal feed over three years.
THE ECONOMY IN BRIEF
- Deficit of $35.1 bn in 2015/2016 reducing to $6.9 bn by 2018/2019
- Real GDP expected to grow by a modest 2.75% in 2015/2016, which is 0.25% slower than expected 12 months ago. Stronger non-mining business investment expected to drive GDP growth in 2016/2017 to 3.25%
- Unemployment rate currently better than predicted at 6.25% but expected to push higher in 2015/2016 before falling again.
- Tax receipts downgraded by $52 billion since the 2014 Budget $20 bn a result of the iron ore spot price almost halving. Iron ore investments and exports directly contributed 15% to economic growth over the
last decade. Australia accounts for 1/3 or world iron ore production
- Australia’s major trading partners are expected to grow by 4.5% in 2015 and 2016.
- Total exports expected to increase by 5% in 2015/2016 and 6.5% in 2016/2017
- Non-mining business investment has increased but remains uncommitted
For advice on how you can make us of these announcements contact Adams Accounting (03) 5147 1525.