Budget 2016/17 - How does it affect my Business?

May 3, 2016

Small Business Budget Highlights:

  • Increase in small business turnover threshold.
  • Cut to tax rate on small business earnings in companies from 28.5% to 27.5%.
  • Unincorporated small business tax discount to be increased.

Increase in Small Business turnover threshold

The small business turnover threshold is planned to be increased from $2m to $10m from 1/7/16. This opens up small business concessions to more businesses. Concessions include a lower tax rate, simplified depreciation and the ability to immediately deduct equipment purchases made before 30/6/17 under $20,000. Importantly however it does not apply to the valuable small business CGT concessions for which eligibility remains at $2m turnover.

Cut to Small Business Tax Rate

The tax rate for incorporated small businesses will drop from 28.5% to 27.5% from 1/7/16. To pass on a similar benefit to unincorporated businesses, the small business tax discount introduced in the last budget will be increased to 8% of tax payable up to $1,000 per person. An example of how this would work is if you received a trust distribution from your small business of $30,000 and say this was taxed at your 32.5% individual tax rate, you would receive a tax discount $780.

While the corporate tax cut applies to businesses with turnover under $10m, the unincorporated business tax discount only applies to businesses with turnover under $5m.

It should be noted that all changes above are dependent on legislation being passed by parliament to approve the changes.

Advice should be sought before taking action on any of the above. If you have any questions about the above please contact us.