What's new for taxpayers and, in particular, small business?

By Phil Shepherd - August 25, 2016

A summary of tax changes for FY 2017 that may impact your small business.

Summary of the key changes affecting FY 2017 

The new financial year is well and truly underway and the dust is slowly settling around some of the recent changes to the tax system. With the smell of spring just around the corner, it is a prudent time to consider how these changes might benefit you and your business.

Small businesses, in particular, should be looking at the following new tax concessions:

  • Instant asset write-off - simplified depreciation rules
  • Deductions for professional expenses for start-ups
  • Small business restructure roll-over
  • Fringe benefits tax changes for work-related devices
  • Small business income tax offset
  • Company tax cut for small business

The proposed increase in the small business turnover threshold to $10m from 1 July 2016 should also be kept in mind as this will open the door for many larger businesses to access these concessions.

The new tax concessions for other taxpayers are more limited in scope but still definitely worth considering:

  • Early Stage Innovation Companies - Tax offset and Capital gains concession
  • New employee share scheme [‘ESS’] rules for start ups
  • Accelerated Depreciation for Primary Producers

Further Details

Instant asset write-off - simplified depreciation rules

Small businesses can immediately deduct the business portion of most assets if they cost less than $20,000 and were purchased between 7:30pm on 12 May 2015 and 30 June 2017.

This deduction can be used for each asset that costs less than $20,000 - whether new or second-hand. You claim the deduction through your tax return, in the year the asset was first used or installed ready for use.

For more information click here

Deductions for professional expenses for start-ups

From 1 July 2015, small businesses are entitled to certain deductions for start-up costs. The range of deductible start-up costs includes professional, legal and accounting advice and government fees and charges.

For more information click here

Small business restructure rollover

From 1 July 2016, small businesses will be able to change the legal structure of their business without incurring any income tax liability when active assets are transferred by one entity to another.

This rollover applies to active assets that are CGT assets, trading stock, revenue assets and depreciating assets used, or held ready for use, in the course of carrying on a business.

This brand new legislation allows many small businesses to move into a more appropriate legal structure and improve the efficiency of their business without incurring a tax cost.

For more information click here

Fringe benefits tax changes for work-related devices

From 1 April 2016, small businesses will not incur a fringe benefits tax (FBT) liability if they provide their employees multiple work-related portable electronic devices that have similar functions. These include devices that are primarily used for work, such as laptops, tablets, calculators, GPS navigation receivers and mobile phones.

This benefit may be in addition to or part of the employee’s salary or wages package.

For more information click here

Small business income tax offset

From the 2015/16 income year, an individual is entitled to a tax offset on the tax payable on the portion of their income that is from:

  • net small business income from sole trading activities
  • a share of net small business income from a partnership or trust less any deductions attributable to your share.

The income tax offset can reduce the tax payable that relates to the individual’s small business income by 5% up to $1,000 each year.

For more information click here

Company tax cut for small businesses

For income years commencing on or after 1 July 2015, the small business company tax rate has been reduced from 30% to 28.5%.

The maximum franking credit that can be allocated to a frankable distribution is unchanged at 30%, even if a small business is eligible for the 28.5% tax rate.

While still unlegislated, the government has announced it will further reduce the corporate tax rate for small businesses to 27.5% for the income year ending 30 June 2017.

For more information click here

Increase the small business turnover threshold to $10m

The turnover threshold that applies to determine if an entity is a ‘small business entity’ is currently set at $2m. The government has announced its intention to increase this threshold to $10m with effect from 1 July 2016. 

This change will give many businesses access to various tax concessions (some discussed above) which may not currently be available to them. However, the turnover threshold for accessing the small business CGT concessions will remain at $2m.

This announcement remains unlegislated, however, we expect to see some draft legislation released soon.

For more information click here

Early Stage Innovation Companies - Tax offset and Capital gains concession

From 1 July 2016, if you invest in a qualifying early stage innovation company [‘ESIC’], you may be eligible for the following tax incentives:

  • a non-refundable carry forward tax offset equal to 20% of the amount paid for your qualifying investments. This is capped at a maximum tax offset amount of $200,000 for the investor and their affiliates combined in each income year;
  • a capital gains concession, under which capital gains on qualifying shares that are continuously held for at least 12 months and less than ten years may be disregarded. Capital losses on shares held less than ten years must be disregarded.

This new measure provides a fantastic opportunity for innovative companies to find new investors and capture the funding necessary to commercialise a new business idea.

For more information click here.

New ESS rules for start ups

Young companies (i.e. less than 10 years old) looking for tax effective ways to motivate and remunerate their staff will benefit from the changes to the tax treatment of employee share schemes which took effect on 1 July 2015. 

Under the start-up concession, employers can offer a real incentive to their staff by reducing the taxable amount relating to the ESS interests to nil or deferring any taxing point for up to 15 years. 

For more information click here.

Accelerated Depreciation for Primary Producers

From 12 May 2015, primary producers can immediately deduct the costs of:

  • fencing – previously deducted over a period up to 30 years
  • water facilities – previously deducted over three years.

They can also deduct the cost of fodder storage assets over three years, instead of over a period up to 50 years.

Primary producers who are small businesses can also use the simplified depreciation rules - including the instant asset write-off mentioned above.

For more information click here


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