The big winners from Joe Hockey’s 2015 Budget are small business owners. With tax cuts on business income and the ability to immediately write-off business assets up to $20,000, small business owners have a lot to be happy about.
Other people in the community were hit hard with this Budget, with overall spending cuts to the Age Pension and anticipated Child Care Subsidy changes not taking effect for two years.
Below is a brief summary of the key Budget points that affect you.
- Small business tax rate cut to 28.5% from 1 July 2015:
A 1.5% cut to the current company tax rate will apply to small businesses with less than $2m of turnover in this Budget. For small businesses not run through companies, there will be a 5% tax offset on business profits capped at $1,000 per individual for each income year.
- Small business can immediately write-off assets up to $20,000:
The best news from the Budget is that small businesses with less than $2m of turnover can immediately write-off assets including cars, equipment and machinery, if it cost less than $20,000. This is effective immediately.
- Startup businesses get immediate deduction for professional expenses:
From 1 July 2015 professional expenses such as accounting and legal advice when starting up a new business is now immediately deductible. Previously it was deducted over 5 years.
- CGT roll-over relief for change of entity structure:
Small business with less than $2m of turnover can change their business structure (e.g. to a trust) without paying Capital Gains Tax. Effective from 1 July 2016.
- No FBT on work-related electronic devices:
From 1 April 2016 small businesses with turnover of less than $2m can provide employees with more than one work-related portable electronic device without Fringe Benefits Tax.
- No changes to personal tax rates
- Age Pension asset test changes:
Leaked prior to the Budget, from 1 January 2017 the maximum assets that can be held for a part pension will be reduced from $1.151m to $823,000 for a couple; and for a single person from $775,000 down to $547,000. Pensioners with low assets could see their pension increase with the assets test threshold increasing to $250,000 for a single homeowner and $375,000 for a homeowner couple.
- Child Care Subsidy changes:
From 1 July 2017 the current Child Care Benefit and Child Care Rebate will be abolished. In its place will be a single means tested subsidy.
- For family incomes up to $65,000 the child care subsidy will be 85% of the child care fee.
- For family incomes of approx. $170,000 the child care subsidy will be 50% of the child care fee.
- There will be no limit of the subsidy, except for family incomes of over $185,000, which will have a $10,000 cap per child.
- Paid parental leave – “double dipping” to be eliminated:
From 1 July 2016 people will not be able to claim parental leave payments from both the Government and their employer.
- Removal of methods for calculating work-related car expenses:
Two uncommon methods of calculating work-related car expenses “12% of original value” method and “one-third of actual expenses” method will be discontinued. Employees can still claim under the more common “cents per kilometer” and “logbook” methods. This Budget change will be effective from 1 July 2015.
For more information on how the Budget will affect you please speak to our qualified Chartered Accountants on (02) 4732 3844. For clients on our “On-Track” and “Growth” plans this will automatically be discussed over the coming weeks.