As you may or may not be aware, there has been some (relatively) good news for small businesses in the past year or so in terms of tax reductions and/or tax benefits.
So who can access these tax benefits, what are the reductions or benefits, and how much are they worth?
Who can access these tax benefits?
First we need to define what a small business is to see who can access the tax benefits.
For the 2017 financial year, a small business is an entity (either a sole trader, partnership, company or trust) with an aggregated turnover (ie gross sales) of less than $10m.
For companies only, in the 2018 financial year the small business company tax rate applies to companies with a turnover threshold of $25m (increasing to $50m for the 2019 financial year onward).
Please note the small business capitals gains tax (CGT) concessions turnover threshold continues to be $2m.
What are the tax benefits?
Secondly, what are the tax reductions or benefits small business’ can access and how much are they worth to you?
- Instant asset write off - whereby a small business can fully depreciate in the year of purchase a business asset that cost less than $20,000 (GST exclusive). Note this is a tax deduction, not a reduction in tax payable as some people think. Further this benefit is due to finish on 30 June 2018.
- Deductions for start up business’ professional expenses – whereby a small business can claim deductions for start up costs eg legal, accounting and government fees.
- Small business restructure rollover – whereby a small business can change the legal structure of their business without incurring any income tax liability when active assets are transferred from one entity to another. An example of this would be a builder who is trading as a sole trader and wishes to begin trading through a company structure.
- Small business company tax rate - as mentioned above, for companies with a turnover of less than $25m, the company tax rate has been reduced to 27.5%.
- Small business income tax offset – if you are a sole trader or receive income from a partnership or trust, you can claim a tax offset up to 8% of the income earned/received, up to a limit of $1,000. Please note that this tax offset applies to small business with turnover of less than $5m.
Exactly how will these tax benefits work for you? Every business situation is different, and our team will work with you to provide tailored advice.
Get in touch with BLG Business Advisers online or by calling (02) 4229 2211 today.