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Australia’s Small Businesses were looked upon favourably in the 2015 Budget.
Treasurer, Joe Hockey, no stranger to Small Business himself, announced tax cuts and tax breaks for the 96% of businesses that fall into the Small Business category.
The $5.5 billion Jobs and Small Business Package announced in the Budget included a 1.5% tax cut, bringing the rate down from 30% to 28.5% for small businesses. This is the lowest small business tax rate for 50 years. A 5% tax cut, up to $1000 per year, also goes to unincorporated businesses (eg. sole traders) by way of a tax credit.
What is a Small Business?
A business with an annual turnover below $2 million is classed as a small business.
The other benefit is a temporary tax break on business purchases. Small Business owners can now claim a tax deduction on business assets up to $20,000 until June 30th 2017.
So what does this $20,000 tax break really mean? Let’s look at business purchases and what you can claim…
All actively trading, registered businesses who have an annual turnover of LESS than $2 Million can use the new tax break. There is no limit to the number of purchases made as the government wants this to be an incentive for small businesses to spend money and hire more staff.
As long as the purchase is related to the business and below the $20,000 limit you can immediately claim the full amount of the purchase as a deduction against your income.
Items that can be claimed are pretty much any asset that is used in the running of the business including but not limited to:
- Vehicles
- Tools
- Fittings
- Machinery
- Furniture
- Heating
- Hot water units and water tanks
- Appliances
- Computers
- Air conditioning
- Security systems
- Fit outs (eg. Kitchens)
- Software for business use (eg. Accounting software)
In addition, professional fees spent on starting up a small business, such as legal or accounting fees can also be claimed immediately, which will be a great help to new businesses.
However, there are a few exceptions including:
- Assets purchased that are over the $20,000 mark. (These can be claimed but over a period of time.)
- Some horticultural plants
- In-house software
NOTE: Businesses need to ensure that they only claim a deduction for an asset’s % use that’s relevant to an “income earning activity”. So if the asset is used for private purposes, for example 50% personal use of a computer, then that needs to be excluded from the claim.
Based on his own experience growing up in a small family-run business, Joe Hockey stated; That small business put a roof over our heads. It paid the bills. It gave all of the family a chance at a better life.
Anyone who owns and runs a small business will understand that sentiment so this package will come as a real boost to many. Those who need to purchase equipment or hire staff but have not been able to afford to are now in a far better position to do so.
Is this your opportunity?
A common echo across the media is; if you’ve ever wanted to start a business the time in now!
If you’re thinking, “it’s now or never”, just make sure you get the right advice on setting up the business and managing your finances – get that advice before you start, because it can prevent lots of little problems later.
Have a chat with Etax Local.
Our friendly team can help you make the right decisions for your business, then help you look after your financial obligations as you grow.
Get in touch with Etax Local today by calling 1300 174 689.
Alternatively, send us an email or request a quote and one of our friendly accounting team will get back to you as soon as possible.
Small Business Resources
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