As it stands, small business entities with a turnover of less than $2 million are taxed at a 28.5% rate (as at 1 July 2015).
The 2016-17 Budget proposed a further reduction of this tax rate to 27.5% from 1 July 2016, along with a small business eligibility threshold increase to less than $10million (up from $2 million).
A key point here is that it applies to companies carrying on a business, so companies that purely own shares or an investment property will fail to benefit.
Although this proposal is a welcome change for cash flow purposes, there is a downside. The imputation rate for dividends will align with the corporate tax rate (27.5%). This means that shareholders receiving a dividend will receive a smaller franking credit and subsequently their ‘top up tax’ on the dividend income will increase. The bottom line for your company’s current franking account balance is that it will suddenly become less valuable.
Christmas and Fringe Benefits Tax (FBT)
With end of year festivities fast-approaching, you might be busy planning the office Christmas celebrations. From a tax perspective, there are a couple of points to keep in mind:
— A Christmas party held for your employees and their families will generally be exempt from FBT
if the cost per person is less than $300. It will not be tax deductible. — A party that costs more than $300 per person will be subject to FBT and tax deductible.
Christmas Gifts to Staff
— Christmas gifts to your employees that are considered non-entertainment, for example gift vouchers, will be exempt from FBT if the gift costs less than $300 (GST inclusive). — This non-entertainment gift will be tax deductible, and you can claim the GST credit. — Entertainment gifts, for example tickets to the cricket that cost less than $300 are exempt from FBT but are not deductible. Entertainment gifts that cost more than $300 are subject to FBT and are tax deductible.
Please contact our office on (07) 3221 4465 if you have any questions about your taxation affairs.