The 2015–16 Federal Budget delivered a number of targeted measures aimed at supporting small businesses, encouraging investment and improving flexibility for start-ups. Overall, it was widely regarded as a small business–friendly budget, with a strong focus on reducing compliance burdens and stimulating economic activity.
To assist clients, we have summarised the key announcements below.
Small businesses (turnover less than $2 million)
Immediate asset write off
Effective immediately, eligible small businesses can claim an immediate deduction for most depreciating assets costing less than $20,000. This threshold applies per asset, allowing multiple purchases to qualify. This measure is designed to encourage investment in tools, equipment and technology.
Company tax rate reduction
From 1 July 2015, the corporate tax rate for small business companies will reduce from 30 percent to 28.5 percent. Importantly, the maximum franking credit rate remains at 30 percent for all companies. This ensures shareholders receiving fully franked dividends will not see a reduction in their effective after-tax outcome.
Tax discount for unincorporated businesses
Individuals operating unincorporated small businesses, such as sole traders, partnerships and trusts, will receive a 5 percent tax discount on the tax payable on their business income. This is capped at $1,000 per individual and will be provided as a tax offset.
Immediate deduction for start-up professional costs
Small businesses will be able to claim an immediate deduction for professional expenses linked to establishing a business, such as company incorporation fees and accounting or legal advice. These costs are currently deducted over five years.
Portable electronic devices
From 1 April 2016, the current annual FBT limit of one work-related portable electronic device per employee will be removed. Small businesses will be able to provide multiple qualifying devices without incurring additional FBT, provided they are used primarily for work purposes.
CGT relief for changes in business structure
From 1 July 2016, capital gains tax relief will be available for small businesses wishing to change their legal structure. This supports businesses transitioning from sole trader or partnership structures to more appropriate arrangements as they grow.
Start-ups
Crowd-sourced equity funding
From 1 July 2015, small businesses will have improved access to crowd-sourced equity funding through simplified ASIC disclosure and reporting requirements.
New employee share scheme rules
The Government has introduced long-awaited reforms to make employee share schemes more attractive to growing businesses. Eligible start-ups must have:
• turnover under $50 million
• less than ten years of trading history
• no listing on a stock exchange
Employees will be able to defer tax until their options are exercised and converted into shares. Discounts on shares will be exempt from tax, while discounts on options will be deferred.
Further refinements include:
• eligible venture capital investments excluded from turnover and grouping tests
• the CGT discount available for ESS interests subject to start-up concessions where options are exercised and sold within twelve months
• Commissioner discretion for cases where employees cannot satisfy the minimum three-year holding period due to factors outside their control
These measures provide greater flexibility and encourage start-ups to use equity as part of their remuneration strategies.
Families and individuals
Car expense calculations
From 1 July 2015, only two methods for calculating car expenses will remain:
• the logbook method
• the cents-per-kilometre method
The cents-per-kilometre method will use a flat rate of 66 cents per kilometre for all vehicles.
HELP repayment obligations for overseas residents
From 1 July 2016, HELP debtors residing overseas for more than six months will be required to make repayments if their worldwide income exceeds the minimum repayment threshold, currently $53,000.
Tax residency for working holiday makers
Most working holiday makers will be treated as non-residents for tax purposes. This means they will not be entitled to the tax-free threshold and will be taxed at non-resident rates.
New childcare subsidy model
From 1 July 2017, a redesigned childcare subsidy system will apply. The subsidy will be means-tested and subject to a work activity test. Key points include:
• families earning less than $60,000 receive an 85 percent subsidy (up to an hourly cap)
• the subsidy tapers to 50 percent for families earning around $170,000 or more
• a $10,000 cap applies for families with income over $180,000
• no cap applies for families earning below $180,000
GST on digital products and services
GST will apply to digital supplies and intangibles purchased by Australian consumers from offshore suppliers. This includes:
• streaming and downloads of music, movies, apps and e-books
• online games
• consultancy and professional services supplied to Australian consumers
Frequently Asked Questions
Did the budget introduce GST on digital products?
Yes. GST was extended to digital products and services supplied to Australian consumers, including streaming, downloads and digital consultancy services.
What were the main small business benefits in the 2015 Federal Budget?
The budget introduced an immediate tax deduction for asset purchases under $20,000 and reduced the company tax rate for small businesses from 30 percent to 28.5 percent. It also provided a 5 percent tax discount (capped at $1,000) for unincorporated small businesses.
Did the 2015 Federal Budget change startup rules?
Yes. Startups received improved employee share scheme rules, tax deferral options, and simplified access to crowd sourced equity funding. Shares issued at a small discount may also be exempt from tax.
If you have any questions about the budget you can contact us here, call one of our accountants in North Sydney on 02 9216 7640 or contact you accountant, tax agent or tax adviser.
