Small businesses are the engine room of our economy. They are the home of Australian enterprise and opportunity and are where many big ideas begin. The Federal Government’s 2016 budget announced that it will reduce the tax burden and increase access to concessions for small businesses.

Small business entity turnover threshold

From 1 July 2016, the small business entity turnover threshold increased from $2 million to $10 million. The current $2 million turnover threshold will be retained for access to the small business capital gains tax (CGT) concessions.

Lower Taxes

The Government has further backed small businesses by reducing their tax rate to 27.5%, starting with businesses with a turnover of less than $10 million from 2016-17 income year. The Government will progressively decrease the tax rate for all companies to a flat 25% by 2026-27.

As many small businesses are not companies, the Government will also extend the unincorporated tax discount to unincorporated businesses with annual turnover of less than $5 million and increased the discount to 8% from 1 July last year, up to a maximum value of $1,000. After this initial increase, the discount will be increased in phases to a final rate of 16% in 2026-27.

Over 3 million businesses have accessed either the lower tax rate or higher discounts during 2016-17.

Expanding access to small business tax concessions

By increasing the small business entity turnover threshold to $10 million, the Government will provide over 90,000 businesses with access to a range of small business tax concessions. From July 2016, all small businesses with annual turnover of less than $10 million will have access to:

  • Instant asset write-off – simplified depreciation rules.
    • Small businesses can immediately deduct the business portion of most assets if they cost less than $20,000 until 30 June 2017.
  • Deductions for professional expenses for start-ups
    • Small businesses are entitled to certain deductions when starting up (i.e. professional legal and accounting advice and government fees and charges).
  • Small business restructure rollover
    • From July 2016, small businesses can change the legal structure of their business without incurring any income tax liability when active assets are transferred by one entity to another. This rollover applies to active assets that are CGT assets, trading stock, revenue assets and depreciating assets used, or held ready for use, in the course of carrying on a business.

Lower taxes and expanded access to tax concessions will mean increased opportunity to grow a small business, employ more Australians and increase wages.

The announced changes present good opportunities for businesses and individuals to save on tax. If you think you may be eligible and want to take advantage of some of the new measures introduced, please contact our office to speak to our small business consultant.

This article is for general advice purposes only. It has not taken into account your personal circumstances or financial goals. If you wish to get more personalised advice tailored to your circumstances and financial objectives, please contact our friendly staff today.

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