2015 Federal Budget - How Changes for Small Businesses Will Affect You

It’s that time of year again where business owners assess the changes the new budget will bring and what it will mean for them. There has been a shift from the previous budget approach of "big savings and paying down debt" to "minimising impacts" with some commentators calling this an election budget.

The highlights for businesses 

• $5.5 billion for small business
• The tax rate for companies with aggregated annual turnover of less than $2 million will be reduced by 1.5% to 28.5% for the 2015 / 2016 income year. However the maximum franking credit rate for a distribution will remain at 30%
• A 5% tax discount for individual taxpayers with business income for an unincorporated business with an aggregated annual turnover of less than $2 million will also be introduced for the 2015 / 2016 income year. The discount, given in the form of a tax offset, will apply to the income tax payable on the business income received and will be capped at $1,000 per individual
• Small businesses will be able to claim an immediate deduction for the cost of assets costing less than $20,000. The threshold will apply for assets acquired and installed ready for use between 12 May 2015 and 30 June 2017
• Offshore suppliers of services or intangibles to Australian consumers will be subject to GST from 1 July 2017
• From 1 July 2015, the zone tax offset will exclude "Fly In, Fly Out" and "Drive In, Drive Out" workers where their normal residence is not within a "zone"
• An immediate deduction will be available for professional expenses that are associated with starting a new business, such as professional, legal and accounting advice or legal expenses to establish a company, trust or partnership will be available from FY16 income year
• Small businesses may change the legal structure of their business without attracting capital gains tax (CGT) liability for the 2016 / 2017 income year. This measure will be available for small businesses with an aggregated annual turnover of less than $2 million. It will enable small businesses to alter their legal structure as they find suitable without being impeded by potential CGT implications
• All primary producers will be able to immediately deduct capital expenditure on feeding and water facilities such as dams, tanks, bores, irrigation channels, pumps, water towers and windmills for income years commencing on or after 1 July 2016. Primary producers will also be allowed to depreciate over three years all capital expenditure on fodder storage assets such as silos and tanks used to store grain and other animal feed
• From FY16, the "cents per kilometre" method will be modernised by replacing the three current rates based on engine size with one rate set at 66c per kilometre. The "logbook" method will still be retained
• From 1 July 2016, the ability for individuals to access government assistance in the form of the existing Parental Leave Pay (PLP) scheme, in addition to any employer-provided parental leave contracts, will be removed

Other changes included in the announcements

• The national deficit will double to $35 billion in 2015 / 2016 with a predicted fall to $7 billion in 2018 / 2019
• The mining sector’s contribution to the economy will slump from 45% to 16% over the next three years
• $499 million payment to be spent on nine infrastructure projects in WA

"We are getting rid of the rorts we can get rid of in relation to various payments but we are not asking Australian families to pay more tax. We want to give them every opportunity to have a go. We want to give small business every opportunity to grow their business, to employ more people, innovate and invest. That is what this budget is designed to do," Treasurer Joe Hockey.

Good news

• No new taxes on superannuation
• An extra $3.5 billion in childcare including $246 nanny trial
• $10,000 payments over 12 months to employers hiring over 50s who have been unemployed for six months
• $1.6 million PBS listing new medicines for melanoma, breast cancer and blindness
• The Medicare Levy low income thresholds for singles, families and single seniors and pensioners will be increased from the 2014 / 2015 income year
• Children will have to fully meet immunisation requirements before their families can access certain government payments from 1 January 2016
• Extra $100 million to save the Great Barrier Reef

Not so good news (depending on your situation)

• Bracket creep (where rising wages put an employee into a higher tax bracket) will result in an additional $2 billion across the forward earnings. This will mostly affect lower paid workers - once they reach $37,001 they go from paying 19 to 33 cents in the dollar and may also lose family tax benefits
• 326,000 asset rich pensions will lose part pension benefits
• 30 multinationals will be required to disclose how much they pay on Australian earnings and greater enforcement of tax laws
• GST will be introduced for imported digital products and services (ie. Netflix and others)

Source: ABC News and the Financial Review.

* Tax write off for small business assets: http://www.abc.net.au/news/2015-05-12/budget-2015-small-business-tax-breaks/6464928

For more information on how the budget changes may affect you, your family, your business or your lifestyle plan, please contact Ian Walker from Archer Gowland on 3002 2699.