Small Business Entity Changes
A small business entity (SBE) can access a number of important concessions, to assist them both from a taxation and administrative viewpoint. Currently to access these concessions, in general the aggregated turnover of the business must be less than $2m annually.
In the 2016-17 Budget, the Government announced plans to increase the SBE entity turnover threshold from $2m to $10m annually. This was to apply from 1 July, 2016. The Bill containing this legislation was recently passed by the Senate (31 March 2017) and was passed through the House of Representative in early May 2017. Accordingly, the concessions will now also be available to those clients with turnover in excess of $2m but less than $10m for the 2017 financial year.
This presents a number of great opportunities for businesses with a turnover of up to $10m annually, being:-
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Simplified depreciation, including use of the Small business entity pooling. This regime provides a 15% deduction on the cost of an asset in the year of purchase (regardless of when the purchase is made) and a 30% deduction each year after the first year.
More importantly, you can now access the $20,000 instant asset write off, which allows an immediate tax deduction for depreciating assets purchased, costing less than $20,000.
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Immediate deductions for prepaid expenses, where the payment covers a period of 12 months or less that end in the next income year.
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GST can be accounted for on a cash basis. This will be particularly beneficial for businesses who consistently have a high level of trade debtors, when compared to their trade creditors.
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Accelerated depreciation for primary producers, where they can elect to immediately deduct the cost of fencing and water facilities. Further, they can also deduct the cost of fodder storage assets over 3 years.
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Small business entity restructure rollover. From 1 July 2016, small business entities can change the legal structure of their business without incurring any income tax liability when certain conditions are met. Combined with the removal of stamp duty on the transfer of private company shares and units, this will be an attractive option for business owners.
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Fringe benefits tax changes. From 1 April 2016, small businesses will not incur an FBT liability if they provide their employees multiple work-related portable devices that have similar functions. This includes laptops, tablets, phones and GPS’s. Further, they will also be able to provide car parking benefits that are exempt from FBT in certain circumstances.
Should you require any assistance or advice in relation to this matter, please contact your Addison Partners contact or call us on 4995 7300.