Tax Tips for Small Businesses

As a small business, you may be eligible for income tax concessions. From 1 July 2016, the turnover threshold for these concessions is:

$5 million for the Small business income tax offset
$10 million for all other income tax concessions.

The turnover threshold up to 30 June 2016 was $2 million for all these concessions.

SIMPLER DEPRECIATION RULES: INSTANT ASSET WRITE-OFF

Small businesses can immediately deduct the business portion of most assets that cost less than $20,000 each if they were purchased:

from 1 July 2016 to 30 June 2017, and your turnover is less than $10 million
from 7.30pm on 12 May 2015 to 30 June 2016, and your turnover is less than $2 million.

This deduction can be used for each asset that costs less than $20,000, whether new or second-hand. You claim the deduction through your tax return, in the year the asset was first used or installed ready for use. Please note: In the Budget 2017, the Government announced an extension of the $20,000 instant asset write-off threshold to 30 June 2018 – the threshold currently reduces to $1,000 from 1 July 2017.

SMALL BUSINESS COMPANY TAX RATE

From the 2016–17 income year, the small business company tax rate has been reduced to 27.5%. This lower rate now applies to small businesses with an aggregated turnover less than $10 million that are:

companies
corporate unit trusts
public trading trusts.

The company tax rate will remain at 30% for all other companies that are not small business entities.

SMALL BUSINESS INCOME TAX OFFSET

The small business income tax offset (also known as the unincorporated small business tax discount) can reduce the tax you pay by up to $1,000 each year. The offset is:

8% for the 2016–17 income year onwards
5% for the 2015–16 income year.

The offset will increase to 10% in 2024–25, to 13% in 2025–26, and to 16% in 2026–27.

To be eligible for the offset, you must be carrying on a small business as a sole trader or have a share of net small business income from a partnership or trust. The small business must have an aggregated turnover less than:

$5 million for the 2016–17 income year onwards
$2 million for the 2015–16 income year.

IMMEDIATE DEDUCTIONS FOR PREPAID EXPENSES

You can claim an immediate deduction for prepaid expenses where the payment covers a period of 12 months or less that ends in the next income year.

SUPERANNUATION

Pay your super guarantee for your staff before 30 June to get the tax deduction in this financial year.
The super isn’t due until 28th July however if you pay this before year end you will get the deduction in this financial year.

Discuss with your staff salary sacrifice arrangements going forward. From 1 July 2017, the maximum concessional super contribution will be $25,000 per annum including super guarantee. All current arrangements in place will need to be reviewed. Staff will need to advise you of their intentions going forward to salary sacrifice from 1 July.

From 1 July 2017, staff may wish to contribute the additional superannuation themselves to their fund and claim a tax deduction at the end of the financial year. This is a new option available and the limit is up to the new concessional cap of $25,000.

From 1 July 2017, the 10% maximum earnings condition will be removed. This means most people under 75 years old will be able to claim a tax deduction for personal super contributions (including those aged 65 to 74 who meet the work test).

Make additional concessional contributions (if possible) to super up to your aged based limit before 30 June as the threshold decreases to $25,000 for everyone from 1 July.