Ok so the 2015/2016 Federal budget has been handed down. There’s not much to it, was a bit of a dud, but it’s nice to see some ads on the tv promoting the small tax savings for small business. Let’s have a quick look:
– $20,000 immediate deduction for assets – We are fielding a lot of calls about this one. Some people believe that they can buy an asset like a 2nd hand car for $20,000 and the govt is going to give them $20,000 back. That’s not how it works!! So if you don’t need a new asset or replacement asset in your business then don’t get one!! If you were genuinely considering replacing a worn out asset or upgrading etc regardless of this new measure then that’s great but don’t just go and buy something that you don’t need! It won’t help your business or cash flow situation. Definitely do not go into debt to buy an unneeded asset.
– Small Companies tax rate reduced by 1.5% – This is good news. Small business incorporated entities now have a reduced income tax rate of 28.5% (from the 2016 tax year) which has been reduced from 30%. There’s no cap on the total tax savings either other than the $2 million turnover restriction. So if you’re lucky enough to run your small business through a company, have a turnover of $2 million, have no expenses, then your total income tax saving could be $30,000!! That scenario granted is not likely but at least the tax saving is not capped at $1,000 which it is for all other small businesses that aren’t run under a company structure.
– Other small business entities 5% income tax discount – This is a rehash of the old entrepreneurs tax offset that was abolished years ago. Sounds good in principle. Especially love how they grab you with the 5% but unfortunately this tax saving is capped at $1,000. Other than the cap this would’ve been a good measure and a real boost to small businesses that aren’t run under a company structure. But a $1,000 cap is a huge downer and in reality is a token gesture that won’t do anything to help small business. Starts in the 2016 financial year.
– Car expense deductions for workers – This one is a huge kick in the guts and surprisingly the morning tv shows and other media aren’t even talking about it. For people who claim the cents per km method for car usage, you will now be limited to claiming 66 cents per km instead of 77 cents per km. Why? Because some motoring group said that’s what it costs to run a modern car per km. Anyway what this means is that for those people who were claiming the 5,000km in travel will be missing out on $550 in work deductions, just like that! Starts in the 2016 financial year.
– Zone offset changes – FIFO and DIDO workers no longer can claim for the zone offset unless they normally reside within that zone. Apparently living in a mine camp and being away from family isn’t harsh enough! We are yet to see the fine print on whether or not a person who resides in a low zone like Cairns will still be able to claim the nights they spend in a higher zone like Weipa. They call it ‘better targeting of the zone offset’. Love the word play. Starts in the 2016 financial year.
– Farmers get good deal – Fences and water assets will be immediately deductible for the full cost instead of having to be depreciated. Fodder storage also will get favourable depreciation rates. This won’t start until the 2017 tax year for some reason however. Why don’t they bring it in now?
There’s a few more gems in there so that most people in Australia will feel some sort of pain. I won’t mention the changes to child care, assets tests for pensioners, backpacking tourist workers, the R&D tax offset. It’s Friday..