Company tax cuts and threshold increases for small businesses

By Sheree Cant - April 13, 2017

The Senate has now agreed on a deal to gradually reduce the company income tax rate and increase the aggregated turnover threshold for small business enterprises.

The Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016 is still required to be passed through the House of Representatives; however the Coalition has indicated that this bill will be passed at the next sitting (9 May 2017) and subsequently enacted.  Once enacted, these changes take effect from 1 July 2016.

If enacted, the future landscape of small business thresholds and company tax rates will be as follows:

Income Year

Small Business Aggregated Annual Turnover less than:  

Small business company tax rate

Large business & investment company tax rate

2015-16

$2 million

28.5%

30%

2016-17

$10 million

27.5%

30%

2017-18

$25 million

27.5%

30%

2018-19 to 2023-24

$50 million

27.5%

30%

2025-26

$50 million

26.0%

30%

2026-27

$50 million

25.0%

30%

Note: Companies that do not carry on a business are classified as investment companies and will remain subject to the 30% company tax rate.

As franking credits available to be attached to dividends are based on the tax previously paid by a company, the reduction in the small business company tax rate will also result in a reduction in the franking credit that can be attached to dividends paid.

The increase in the small business turnover threshold applies to all business entities including sole traders, partnerships, companies and trusts.  The increase in the threshold will open up a variety of small business tax concessions previously only available to those businesses with an aggregated turnover of less than $2 million, including (but not limited to):

  • Simplified depreciation rules including the immediate write-off of depreciating assets costing less than the threshold amount ($20,000 until 30 June 2017), and pooling of most other depreciating assets in the general small business pool
  • Accounting for GST on a cash basis;
  • Immediate deduction for prepaid expenses, where the prepayment covers a period of 12 months or less
  • Fringe benefits tax concessions.

However the threshold to access the small business capital gains tax (CGT) concessions remains at less than $2 million and access to the small business income tax offset has been set at less than $5 million.

If you would like to know more about how these changes may impact your business, please contact your Pitcher Partners advisor.


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