Update on tax incentives for small business

December 23, 2015

Small Business was the big winner in the last Federal Budget. However, how do we continue to reap the rewards of that budget break? Well, we all know that SMEs with a turnover of less than $2m can deduct equipment bought and installed during the financial year and costing less than $20,000. And there is no limit on the number of eligible assets that you can depreciate. The advice from the Chartered Accountants Australia when the announcement came through prior to the last EOFY was wait and plan. They said to ask yourself: What new equipment does your business really need? How would the new equipment achieve your long-term business goals? How will you finance the purchase?

Of course, there are many ways to finance the purchase, but if it’s one that will receive a return on investment (ROI) within a six-month period of time, then Kikka Capital is a great option for you. This tax break does come with a warning, however. The ATO will have its radar out to monitor the response from SMEs. Firstly, $20,000 is a large amount to deduct from a single purchase, so only genuine eligible small businesses will receive the concession. Secondly, the ATO collects a huge amount of data on small business spending patterns, so the Chartered Accountants say the ATO will be watching the following:

  • Falsely representing an annual turnover as less than $2m.
  • Breaking down one large purchase into lots of less than $20,000 purchases.
  • Bringing pre-budget equipment purchase contracts in the post-budget eligibility period.
  • False invoicing.
  • Quoting a false ABN.
  • Non-business taxpayers misrepresenting their eligibility for an ABN.
  • Buying equipment for personal or home use, not for business use.
  • Private buyers, giving funds to small business taxpayers, asking them to buy equipment on their behalf.
  • Purchasing equipment from relatives, associates or related entities.

While the above asset deduction was the major tax incentive for small business, however, other cuts in the 2015-2016 budget are:


1.5% tax cut for companies

If your business is a company, you will receive a cut of 1.5 percentage points, so your new company tax rate is 28.5%.

5% tax discount for others 

If you’re not a company, the amount of tax you need to pay on your business income will be reduced by 5%, capped at $1,000 each year.


In terms of reducing the red tape, it’s also important to know that there are impending changes to the Fringe Benefits Tax (FBT) for those with a turnover of less than $2m. From April 1, 2016, you don’t have to pay FBT on portable electronic devices you hand to your employees for work-related use (mobiles, laptops, tablets).


For more on how Kikka Capital can help with your small business financing decisions, visit www.kikka.com.au.

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