It’s taken a lot of give and take between politicians but the proposed changes to small business taxation rules from the 2015/16 Federal Budget have been passed into law. Take advantage of these tax breaks to help improve your business’ cash flow.

The following have been backdated to apply from 1 July 2016, ie. the 2016/17 financial year:

  1. The small business turnover threshold has increased from $2 million to $10 million. This allows more businesses to benefit from a range of concessions, including the $20,000 instant asset write-off and the lower company tax rate.
  2. The annual company tax rate for small business has been reduced from 30% to 27.5%. This applies only to the aggregated turnover of “small business entities” which include companies, corporate unit trusts and public trading trusts with a turnover of less than $10 million.
  3. On this basis, the maximum franking credit that a small business owner can now allocate to a frankable distribution is 27.5%. Talk to your tax adviser if you have already issued dividends during 2016/17.
  4. The small business income tax offset has increased to 8% with a limit of $1,000 per annum. This offset is limited to businesses with a turnover of less than $5 million and applies only to business income for sole traders, or the share of business income for partnerships or trusts.

The government has more changes planned, including extending the instant asset write-off level  of $20,000 to apply to 30 June 2018. Currently it is set to reduce to $1,000 p.a. from 1 July 2017.

As always, tax law is never simple, so contact us to ensure you are making the most of the available tax concessions for your business.