Note: The ATO has issued a Fact Sheet as a timely reminder before the end of the financial year on the changes announced in last year’s Budget.
The ATO stated that the following tax concessions were announced in the 2015 Budget:
• Instant asset write off – simpler depreciation rules;
• Deductions for professional expenses for start-ups;
• Small business restructure roll-over;
• FBT changes for work-related devices;
• Small business income tax offset; and
• Company tax cut for small business
Instant asset write-off – simpler depreciation rules
Small businesses can immediately deduct the business portion of most (new or secondhand) assets if they cost less than $20,000 and were purchased between 7.30pm on 12 May 2015 and 30 June 2017.
From 1 July 2017, the threshold will return to $1,000.
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; and
• Water facilities – previously deducted over three years
They can also deduct the cost of fodder storage assets over three years, instead of 50 years.
Deductions for professional expenses for start-ups
From 1 July 2015, small businesses are entitled to certain deductions when starting up a small business.
The range of deductible start-up costs includes professional, legal and accounting advice, and government fees and charges.
Small business restructure roll-over
From 1 July 2016, small businesses will be able to change their legal structure without incurring any income tax liability for certain transactions.
This applies when transferring active assets that are;
• CGT assets;
• Trading stock;
• Revenue assets*; and
• Depreciating assets
(*) An asset is a revenue asset if the profit or loss on disposal of the asset would be taken into account in calculating the taxpayer’s assessable income or tax loss, otherwise than as a capital gain or capital loss (e.g., a property acquired to develop and sell at a profit).
The ATO says that practitioners should advise their small business clients that, to use this roll-over, each party to the transfer must also be a small business entity or an entity that:
• Has an affiliate that is a small business entity;
• Is connected with an entity that is a small business entity
• Is a partner in a partnership that is a small business entity.
The roll-over is available to clients when all of the following criteria are met:
• All parties to the transaction choose to apply the roll-over;
• There is no change to the ultimate economic ownership;
• The transfer is part of a genuine restructure;
• Assets transferred are eligible assets; and
• All parties meet the residency requirement.
FBT changes for work-related devices
From 1 April 2016, small business will not incur an FBT liability if they provide their employees with 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.
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; and/or
• Their share of net small business income from a partnership or trust
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.
The ATO will work out the offset based on the total net small business income reported in a client’s income tax return.
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.
Should you have any queries in regards to the above article, please do not hesitate to contact our office on
02 4958 1829 or email our Client Support Manager on firstname.lastname@example.org.
Reference: ATO website – Small Business concessions – What’s new for small business