Last Tuesday Joe Hockey handed down his second budget. I can safely say this isn’t as harsh and boring as the budget from a year ago.
Small businesses that are making some money are the big winners.
The Instant Asset Write-Off
From 7:30pm Budget night to 30th June 2017 if you are a small business with aggregate turnover of less than $2 million then plant items that cost $20,000 exclusive of GST or less can generally be written off (if business related).
This is HUGE! 95% of small businesses fit into this category. You can acquire multiple items.
For example:- If you are looking at a profit of $120,000 and decide to spend $80,000 on multiple items (all below $20,000 as an individual item) Rather than writing the items off over 5 to 10 years why not write them all off at once.
Small business will have to be smart with what they decide to buy. E
nsure that you invest in plant that is going to keep up with technology and grow your business for years to come. Examples are Dentists buying dental chairs. Tradies buying used Hiluxes (2-4 years old for $21,000 including GST).
IT businesses buying new servers at a cost of $18,000 each. Motor mechanics investing in modern hoists for $14,500.
The list goes on. Items can also be financed to better cash flow.
Next Financial Year Changes
The company tax rate will cut to 28.5% for businesses that turnover aggregate less than $2 million.
Other structured entities can receive a 5% discount up to $1,000 total on their payable tax. Trading Trust structures are common.
To take advantage of this change you may consider not paying a wage from your trust – but distribute all of the profit instead (2015/6 year).
An example how this works:- Matt runs a successful café that turnover less than $2 million through a trading trust. He decides to distribute the $80,000 profit 100% to himself.
Tax payable is usually $18,000. With a 5% discount he ends up with a bill of $17,100 (a saving of $900).
Claiming Car Expense Deductions
Modernising the existing car expense claim methods. From 01/07/2015 there will be only two methods employees can claim car expenses.
Up to 5000klm at 66c per klm per car per driver or a log book method. (Gone are all the other rates and methods)
Better targeting of Zone Tax Offset (‘ZTO’) to exclude ‘fly-in fly-out’ and ‘drive-in drive-out’ workers (‘FIFO/DIDO workers’).
Unless you permanently live in a remote location the Zone offset will not apply.
Immediate deduction for professional expenses on commencing a new business
From 1 July 2015, the government will allow businesses to claim an immediate write-off for a range of professional expenses associated with starting a new business, such as professional, legal and accounting advice.
Release of superannuation for terminal medical condition – relaxing the release criteria
From 1 July 2015, the government will extend access to superannuation for people with a terminal medical condition by extending the above certification period (i.e., the period within which the individual is likely to die) to two years.
This will give terminally ill patients earlier access to their superannuation entitlements. There are other changes but they don’t come in until 01/07/2016.
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