What the 2015 Budget means for small business

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What the 2015 Budget means for small business

Small businesses have been touted as the big winners in the 2015 Budget handed down in Mayii. The Jobs & Small Business package has been garnering most of the attention and has been designed to help promote the growth of Australian small businesses. The good news is 96 per cent of Australian businesses may be eligible for these tax breaksiii.

Tax benefits for small businesses

From 1 July 2015, small businesses which have an annual turnover of less than $2 million will see a reduction in their company tax rate from 30 per cent to 28.5 per centii. This tax reduction will increase profits which can in turn, increase business investmentiv. As many small businesses do not operate as a company, sole traders and partnerships will instead receive a 5 per cent tax discount on their business income up to $1000 per individual, per annumv.

From 1 July 2015, any small business which has an annual turnover of less than $2 million will see a reduction in their company tax rate from 30 per cent to 28.5 per cent.

Depreciation and other incentives

Small business may also be able to claim an immediate tax deduction for any asset they purchase up to $20,000 for the next two financial yearsvi. This means that whether a café needs new kitchen equipment or a tradie needs a new ute or tools, the assets may be covered as long as they are under $20,000; an increase of 2000 per cent over the previous $1000 thresholdvi. There is no limit as to how many claims a business can make, however some horticultural plants and any in-house developed software packages are not included. Any assets purchased over the $20,000 limit can be pooled together and depreciated at 15 per cent for the first year and then 30 per cent for each subsequent year over the life of the assetvii. Professional expenses, such as accounting and legal fees, incurred while setting up a new business can also now be immediately written offviii.

The Budget also outlines a number of initiatives designed to encourage small businesses to employ young job seekers who are new to the workforce as well as parents returning to the workforce and older workersix. A pool of $1.2 billion in wage subsidies will be available to small businesses to help cover the costs of hiring and training new staffix. Reforms of the Restart wage subsidy will see benefits paid to employers over 12 months, instead of 24x and there will also be changes to the Tasmanian Jobs Programme, Youth and Long Term Unemployed subsidiesviii.

One of the major goals of the 2015 Budget is to reduce the red tape associated with registering and running a small business. In 2016, changes to the Capital Gains Tax and the Fringe Benefits Tax will be implemented in an effort to cut down on the obstacles facing small businesses when changing company structure or supplying electronic devices to staffviii. The Government has indicated that it plans to review regulatory requirements with the intent to reduce compliance costs later in the yearvii.

Until 2017, small businesses with a turnover of less than $2 million per year can immediately write off the purchase of new equipment up to $20,000.

What to watch out for

The Institute of Public Accountants is urging business owners to speak with their accountant before buying large ticket items that fall under the new $20,000 thresholdiv. The instant tax write off may seem like a saving grace for replacing or updating equipment, but it's important to remember that a business needs to have a taxable profit in order to reap the rewards from the eligible purchases and that these benefits are realised when the next round of taxes are filediv.

The ATO has also warned that they will be cracking down on dodgy tax deals; they will be looking for things such as an increased rate of ABN registrations and keeping an eye out for people trying to write personal purchases off as businesses expensesiv. An accountant will be able to advise whether or not the ATO will deem a purchase as appropriate for the business and if further documentation will be needed to prove the new asset's function within the business.

iAustralian Government, viewed 24 June 2015,

iiForrest, J. 2015, 'Budget 2015-16 - small business relief', Financial Planning Magazine, viewed 24 June 2015,

iiiGrattan, M. 2015, 'Federal Budget 2015: Small business wins in grab for confidence', The Conversation, viewed 24 June 2015,

ivMcGrath, P. 2015, 'Budget 2015: Will the small business tax breaks boost economic growth?', The ABC, viewed 24 June 2015,

vAustralian Government, Tax discount for unincorporated businesses, viewed 24 June 2015,

viReference'Budget 2015: $20,000 small business tax break explained', The ABC, viewed 24 June 2015,

viiReferenceAccelerated depreciation, viewed 24 June 2015,

viiiReferenceJobs and small business package, viewed 24 June 2015,

ixReferenceHelping job seekers into work, viewed 24 June 2015,

xReference2015-16 Budget - employment overview, viewed 24 June 2015,