Overall the budget is set to have a very positive impact on small business. The 5 major benefits for small business owners were the instant asset write-off, a reduction of 1.5% tax for incorporated business, a 5% tax break for non-incorporated businesses, new benefits for start-ups and no major changes to self-managed super funds (SMSFs). We have broken down the benefits for small businesses from last night’s budget below.

INSTANT ASSET WRITE-OFF

Starting immediately, businesses with revenue under $2 million can claim tax deductions on assets worth up to $20,000. This is very generous with the previous instant asset write-off capped at $1,000. The new threshold for the instant asset write-off will replace the need to claim tax deductions over several years for items such as new computers, cars, vans or tools for tradies.

The instant asset write-off does have some eligibility criteria. This being that businesses must be actively trading and can demonstrate this through ongoing quarterly Business Activity Statements. This scheme is expected to benefit small business owners for the next 2 years, however we urge caution as the budget still has to be passed by parliament.

REDUCTION IN SMALL BUSINESS TAX

The tax rates will be lowered for both small business owners and unincorporated businesses from the 1st July 2015. The small business tax rate for incorporated businesses has been lowered by 1.5% for small business owners with annual turnover of less than $2 million. This tax rate has been lowered from 30% to 28.5%. There is also a 5% tax discount for unincorporated businesses – this includes sole traders, partnerships, trusts etc. These tax reductions represent the lowest small business tax rates in almost 50 years.

NEW BENEFITS FOR START-UPS

Overall the budget appeared to be in favour of start-ups with a section of the document devoted to “Encouraging start‑ups & entrepreneurship”. Although $70 million has been allocated to encourage start-ups and entrepreneurs, not much is known about what specific benefits will be on offer. The government has been consulting widely with the start-up community and so far there has been proposed changes to employee share schemes.

The new policy details that employees will no longer have to pay income tax when shares or options are issued regardless of whether or not they have realised any financial benefits at that particular time. In addition to this, it was announced last night that there would be an immediate deduction of expenses for start-ups when setting up new businesses.

These expenses could include professional services fees such as accounting fees associated in the establishment of businesses, companies and trusts. Additional insights also included that business registration is going to be streamlined into one website that will act as a one-stop shop for setting up a business. We look forward to further announcements on the benefits available to start-ups and entrepreneurs.

SELF- MANAGED SUPER FUNDS (SMSFS)

Self-managed super funds were left untouched by the budget after much speculation of changes. The limited recourse borrowing arrangements (LRBAs) was not impacted despite some speculation the government would use the budget to address the Financial System Inquiry’s recommendation to ban borrowing on super.

FINAL COMMENTS

Overall we think that the government has shown that they recognize the impact that small businesses has on the Australian economy. As small business owners ourselves we recognize that the wealth and prosperity of Australia is generated by small businesses and entrepreneurs. This budget will help small businesses to invest which will create employment opportunities that benefit society as a whole.

By Jim Vass

This article is provided as general information only and does not consider your specific situation, objectives or needs. It does not represent accounting advice upon which any person may act. Implementation and suitability requires a detailed analysis of your specific circumstances.