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Private Business

Small businesses with aggregated annual turnover of less than $2 million will be the beneficiaries of the Government's Growing Jobs and Small Business package which is aimed at helping small business to invest, grow and employ more people.

Firstly, the Government has confirmed tax cuts for both incorporated and unincorporated small business entities from the 2015-16 income year. This should provide much needed cash flow respite to support business activity and growth.

The company tax rate will be reduced from 30 per cent to 28.5 per cent for small business companies.

Unincorporated small businesses will benefit from a five per cent discount on income tax payable on income from business activity. The discount will be capped at $1,000 per individual for each income year, and delivered as a tax offset. As such, small business operators will need to carefully assess whether to incorporate or not.

From a company perspective, the rate reduction does not affect the company's franking ability as it is proposed that the current maximum franking credit rate for a distribution will remain unchanged at 30 per cent for all companies. However no detail is currently available regarding franking account administration for the companies that qualify for the reduced tax rate.

The package will also include the following measures available from 1 July 2015:

  • Immediate deduction for a range of professional expenses associated with starting a new business, such as professional, legal and accounting advice, instead of spreading the deduction over five years.
  • Easier access for small businesses to crowd source equity funding by providing necessary funding to Australian Securities and Investment Commission (ASIC) to simplify reporting and disclosure requirements.
  • Investment into software allowing business to deal with Government agencies such as ASIC and the Australian Taxation Office (ATO) more efficiently.

From the 2016-17 income year, the Government will provide tax relief for small businesses that change their legal structure by way of a capital gains tax rollover.

In addition, small businesses may claim an immediate deduction for most depreciating assets that cost less than $20,000. This will apply to assets acquired and installed ready for use from 7.30pm (AEST) 12 May 2015 to 30 June 2017.

The Government will also suspend the current 'lock out' laws for the simplified depreciation rules (these prevent small businesses from re-entering the simplified depreciation regime for five years if they opt out) until 30 June 2017.

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