Small businesses and sole traders have had some big wins in this year’s federal budget. From accelerated asset depreciation to tax cuts, we unpack the details.
Time to spend up!
The federal government has launched a $5.5 billion package to stimulate small business growth.
So what does this mean for you? Your business will receive an immediate tax deduction for any individual assets you buy costing less than $20,000 a big jump from the current $1000 threshold.
This tax-deduction arrangement will continue until 30 June 2017, which is great news for those looking to start a new business. Current owners wanting to make some updates can also take advantage. Small businesses can apply the $20,000 rule to as many individual items as they like.
So whether you are a café owner needing an upgrade to your coffee machine as well as some new furniture, or a tradie after the latest tools plus a new computer, it’s now easier to add to your assets.
However, to be eligible for this tax break your business has to demonstrate ongoing activity through business activity statements. To ensure your business activity statements are up to date, use accounting software like QuickBooks Online allowing you to track profits, invoicing and payroll plus inventory.
For items costing over $20,000, businesses can still claim depreciation at current rates (15 per cent in the year the item was bought and 30 per cent in the following years).
The government is lowering the tax rate for small businesses with an annual turnover of less than $2 million. The company tax rate will now be reduced by 1.5 per cent to 28.5 per cent.
Companies with an annual turnover of $2 million or above, however, will continue to be subject to the current 30 per cent tax rate on all their taxable income.
Meanwhile, sole traders, partnerships and trusts with annual turnover of less than $2 million receive a 5 per cent tax discount from 1 July 2015 for up to $1000 per individual in an income year. That will deliver a tax cut of $1.8 billion over the next four years.
Need an extra hand? Employers who that jobseekers an ongoing position can receive a wage subsidy with flexible payment arrangements.
Startups can immediately claim the costs of starting a business previously this had to be written off over five years.
The government is cutting the fringe benefits tax (FBT) for portable electronic devices.
So whether you’re thinking about creating a startup, wanting to improve your existing small business or going at it as a sole trader, take advantage of this year’s budget offerings.