Four fast facts before 30 June

From measures to promote jobs and growth, through to a focus on fairness, what does the recent Federal Budget announcement mean for the business community?

Well, there seems to be benefits across the board.
With the year-end fast approaching, it’s time to consider how the Federal Budget might impact you and your business:

1: Depreciation under the spotlight

This year’s budget revealed an immediate deduction for certain asset purchases.

In the previous budget, those entities who satisfied the definition of a small business entity, organisations could claim an immediate tax deduction for depreciable assets costing less than AU$20,000.

In the newly released Budget, the definition has been extended.

Overall and subject to legislation being passed, from 1 July 2016 all businesses with an annual turnover of less than AU$10 million may be entitled to an immediate deduction for asset purchases costing less than AU$20,000 and this timeframe is up until 30 June 2017.

2: Cutting the cost

In a rapidly evolving business and economic landscape, the only constant is change.

In the recent Federal Budget the Government noted that Australia currently has the seventh highest company tax rate of the 34 Organisation for Economic Co-operation and Development (OECD) countries and a rate that is much higher than our Asian neighbours. The intention is that Australia move to the ‘middle of the pack’ on company tax rates – and while this ten year plan is somewhat complicated in its implementation, the trend to a lower tax rate is to be encouraged.

The Federal Budget announcements set the scene for changes in tax rates with a tax cut to 27.5 percent for all incorporated business with a turnover of less than $10m.

Overall, the corporate tax rate is expected to ratchet down over the coming years based on the turnover of a business.
Although these changes to tax rate cuts are subject to legislation being passed, there might be even more of a drive for businesses to consider bringing forward tax deductions before year-end and delaying assessable income to after year-end – depending on the tax rate benefits.

3: Time to be frank with franking credits

Another item to keep on the end of financial year checklist is that franking credits will only be distributed in accordance with the tax paid.

What this essentially means is that while the change to the corporate tax rate is generally viewed as a positive one, the Government has announced that franking credits will be calculated with reference to the corporate tax rate suffered by a company in the year the dividend is paid.

If a business has retained profits that were subject to tax at 30 percent, and which are not paid as dividends until a year when the corporate tax rate is lower, a tax leakage may arise.
#4: Raising the bar on accessibility

For many businesses, an increase in access to tax concessions can have a major impact. A key point in the recent Federal Budget announcements was that the Government will seek to provide small businesses with access to a number of tax concessions.

Subject to legislation being passed, the Government purports to achieve this by raising the threshold for these concessions to $10 million, up from the current $2 million amount – thereby widening the amount of people who can access this change in policy. Fundamentally, this update is expected to provide over 90,000 businesses with access to a range of small business tax concessions.

What is important to note however is that: these threshold changes is not expected to affect eligibility for the small business capital gains tax concessions, which will only remain available for businesses with annual turnover of less than $2 million or that satisfy the maximum net asset value test.

Have you started thinking about your 30 June planning?

In this financial year lead up, it’s important to take stock of where you are at and how the recent updates from the Federal Budget might impact you and your business.

With a focus on planning and preparation, you can be on the front foot when it comes to making the most of the Federal Budget tax implications and policies.

The time to act is now.

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