How the 2016 Federal Budget Affects Your Business
The Federal Budget has been relatively kind of late to small businesses with some significant initiatives being offered up. Here is a snapshot of some of the measures which may have a direct effect on your business. Of course with the Federal Election later this year, anything could happen so enjoy the benefits while they last.
Lower Tax Rate for Businesses Earning Less than $10 million
Last year the company tax rate of 28.5% was introduced to companies with a turnover of less than $2 million to be applied to the financial year ending 30 June 2016. Come July 2016, the threshold will increase from $2 million to $10 million and a lower tax rate applied. Note however the $2 million threshold will be retained for small businesses to access Capital Gains Tax (CGT) concessions. This policy change will affect about 870,000 businesses employing 3.4 million Australians.
The rate for the financial year ending June 2017 will be reduced to 27.5% for companies earning less than $10 million. Those opting for PAYG installments will benefit from the lower tax rate as of July 2016. This year’s budget aims to reduce the fiscal rate to 25% over the next decade. This lower rate will apply to businesses up to $25 million in turnover for 2017-18 rising to $100 million in 2019-2020. By 2020, more than one-half of all employees will be paying the lower tax rate of 27.5%.
Discounted Tax Rate for Sole Traders, Trusts and Partnerships
The federal government is intending to increase the discount applied to tax paid by sole traders, trusts and partnerships and starting from 30 June 2016, a discount of 8% will apply. This will be offered to businesses earning less than $5 million; a huge benefit for non-incorporated businesses. The discount will be increased to 16% in stages until 2026-27.
Deduction of Assets Less Than $20,000
You may already be familiar with the ruling for the deduction of assets worth less than $20,000 (excluding GST). Businesses earning less than $10 million will be able to also take advantage of this offer in the next financial year for assets purchased between 1 July 2016 and 30 June 2017. From 1 July 2017, the threshold will revert to the existing $1,000. Remember to plan your larger asset purchases accordingly.
Middle-Income Earners Tax Cuts
Tax cuts are also offered for middle-income earners bringing in less than $87,000 from 1 July 2016. The taxable income for those earning between $37,001 and $87,000 from 1 July will be 32.5%. This move by the Federal Government sees approximately half a million taxpayers fall from their previous tax bracket of 37%.
No Exemption on Imported Goods
At the moment, an exemption stands on all goods that are imported into the country with a value of less than $1,000. As of 1 July 2017, this exemption will be removed, and imports will face the same tax rate as goods purchased locally. Foreign suppliers will now need to factor in their GST obligations when selling products to Australian customers.
Additional Benefits to Employers Hiring Young Job Seekers
Cash bonuses are applicable for employers that offer internships and hire young job seekers – a win-win for small businesses across the country.
Updated Superannuation Laws
Small businesses will also need to ensure they are aware of the new superannuation laws and necessary updates brought about by SuperStream. They are not a guideline but a responsibility for all small business owners. The high-income earner superannuation adjustments will save $2.9 billion over the next four years.
Whether or not these are applicable to your business now, being aware of what you can aspire to as your business grows is important. Knowledge, as they say, is power.