The May 2015 Federal Budget contained a number of announcements involving the taxation of small business. A small business has an individual or aggregated turnover less than $2M. Listed below is a summary of the main changes.
From 1 July 2015, the company tax rate will reduce from 30% to 28.5%.
The dividend franking rate will remain at 30%. In some cases, there may be fewer franking credits to pass on to shareholders based on the franking account balance.
A 5% discount will be provided to individuals who receive business income from unincorporated entities such as sole traders, trusts and partnerships.
The discount will be paid in the form of a tax offset capped at $1,000 per person each year.
Immediate Deduction for Professional Fees
It is proposed that, as from 1 July 2015, start up businesses will be able to claim establishment costs (e.g. professional, legal and accounting advice) as an immediate tax deduction.
Eligible assets acquired and ready for use between 12 May 2015 and 30 June 2017 can be claimed as an immediate tax deduction.
Eligible assets include most capital assets (e.g. cars, equipment, computers) costing less than $20,000.
As from 1 April 2016, small business employers will be able to provide employees with more than one portable electronic device (e.g. laptop, tablet) without attracting any FBT liability.
Work Related Car Expenses
From 1 July 2015, taxpayers will only have 2 methods available to claim work related car expenses – logbook and cents per kilometer method.
Under the cents per kilometer method, there will be a flat rate of 66 cents per kilometer regardless of the engine size (limit of 5,000 kilometers).