The key small business changes in a nutshell, including changes to the instant asset write-off and company tax rate.
For many Australian businesses, the most interesting aspect of last night’s Federal Budget will be changes to the instant asset tax write-off.
The Budget increases the instant asset tax write-off threshold from $25,000 (announced earlier this year, but not legislated yet) to $30,000. So, if your business bought, first used or installed a server worth $28,000, it would be able to claim that amount as a deduction in the same financial year, rather than using depreciation rules to claim a tax deduction over multiple years.
The Budget also makes more businesses eligible to use the instant asset tax write-off rule. Previously, only businesses with an annual turnover of up to $10 million were eligible. The Budget increases that threshold to $50 million per year.
The Budget still allows for deductions relating to assets that cost $30,000 or more. But the value of these assets would be added to a pool and a percentage of their value deducted over multiple years.
Other rules also apply to instant asset tax write-offs – go to the ATO web site to learn about the current rules.
Keep in mind that Parliament hasn’t passed the Budget yet, and a Federal election is expected soon. But if the changes come into effect, they will apply to assets purchased after 7.30pm on April 2, 2019.
Company tax rate and unincorporated small business tax discount
The Government also referred to previously announced plans to cut the company tax rate for businesses with annual turnover of less than $50 million. This plan would see businesses currently taxed at 27.5 percent move to a 25 per cent company tax rate by 2021-22.
And it has legislated to speed up increases to the unincorporated small business tax discount. The discount is scheduled to increase from 8 per cent to 13 per cent in 2020-21.
Sole traders or people with a share of small business income from a partnership or trust are eligible, if the business’s aggregated annual turnover is under $5 million.
We’ve covered the company tax rate and unincorporated small business tax discount changes in more detail here.
Have you made use of any of any of these schemes? Add your comment below.