We are very excited by the initiatives brought forward for small - medium business in the 2017 - 2018 Budget. They are unprecedented and bring with them great opportunities which Small-Medium Business owners may now be in a position to take advantage of.
Walsh Accountants is a strong advocate for business reforms and any legislative changes that will help build a strong business sector. We are very excited by the changes that were announced on the 9th May and the opportunities it creates for our Small – Medium business clients.
If any of these changes speak to you and you would like to discuss how you can take advantage of them for your business, please do not hesitate to contact us to speak with your accountant.
- Tax cuts begin in 2016–17 for businesses with annual turnover less than $10 million, with the tax rate for companies cut to 27.5 per cent – the lowest level in 50 years.
- Unincorporated businesses with annual turnover of less than $5 million also benefit from an increase in the rate of the unincorporated tax discount to 8 per cent
- Over 90,000 additional businesses will gain access to the small business tax concessions as a result of the small business turnover threshold being increased to $10 million per annum, five times higher than was originally available.
- Further expanding on these small business initiatives, in this Budget the Government will extend the $20,000 instant asset write-off for a further 12 months to 30 June 2018. This measure will improve cash flow for small business, providing a boost to small business activity for another year, helping them to reinvest in their business and replace or upgrade their assets. Improved cash flow will also give businesses the flexibility to hire more employees and pay staff more.
How tax reform helps small business – Case Study
Justin owns and operates a carpentry company from three premises employing 10 people. His business has an annual turnover of $7 million and taxable income of $400,000 (excluding deductions for asset purchases). On 1 June 2017, Justin's company purchases a panel saw costing $7,000, an edge bander for $10,000 and a belt sander for $14,000 (all exclusive of GST) for one of his three premises. On 1 January 2018, his company purchases another panel saw, edge bander and belt sander (at the same prices) for each of his remaining two premises.
Prior to the budget changes, Justin's company paid tax at the 30 per cent company tax rate and was not able to access a range of small business tax concessions.
As a result of the Ten Year Enterprise Tax Plan announced in the 2016–17 Budget, Justin's company pays tax at the lower 27.5 per cent tax rate. Justin's company is now also an eligible small business as it has annual turnover below the increased $10 million turnover threshold and his company can now access a range of small business tax concessions, including the instant asset write-off for assets costing less than $20,000.
With the $20,000 instant asset write-off being extended for a further 12 months, Justin's company can continue to immediately deduct assets for his carpentry business that are each valued at less than $20,000 until 30 June 2018.
Impact of the Government's changes
Justin's company will receive an additional cash flow benefit of around $18,300 in 2016–17 as a result of the lower company tax rate and access to the instant asset write-off. As a result of the Budget measure to extend the $20,000 instant asset write-off, his company will also be around $14,500 better off in 2017–18.
Justin can use the additional cash flow benefit in each of these years to reinvest in and grow his company.