Income Tax Changes – Small Businesses

Tax Rates

The tax rate for small business entity companies has been reduced to 27.5% for the 2017 financial year, down from 28.5% in the 2016 year.

To be eligible for this rate, you need to be considered a “small business entity.” To meet this definition, you must:

▪ operate a business for all or part of the income tax year, and

▪ have an aggregated turnover less than $10m

All other companies continue to be taxed at 30%

The small business turnover for most concessions has increased from $2m to $10m.

Individual small business taxpayers are entitled to 8% discount (increased from 5%) of the income tax payable on the business income received from a small business entity (other than a company), up to a maximum of $1,000 a year, with the aggregated turnover test being increased from $2m to $5m. This concession only applies to tax payers running a small business rather than merely receiving personal services income.

Accelerated Depreciation

An immediate deduction is still available for an asset costing less than $20,000 acquired and first used or installed ready for use on or before 30 June 2017.

The balance of the general small business pool is also immediately deducted if the balance is less than $20,000 at 30 June.

Small Business Restructure Rollover

From 1 July 2016, a small business entity can transfer active assets from one entity to one or more other entities without incurring a tax liability. Please contact us if you are considering restructuring your small business entity.

Intangible Assets

Businesses have the choice to self-assess the tax effective life of intangible assets (e.g. patents, copyrights) acquired after 1 July 2016, or to continue using the existing statutory effective life.