Broadly, small businesses with an aggregated annual turnover of less than $2 million will be eligible for the following concessions:
Small Business Tax Cuts
These tax cuts will be available from the 201516 income year.
28.5% Tax Rate for ‘Small’ Companies
The Government will reduce the company tax rate from 30% to 28.5% for small companies with an aggregated annual turnover of less than $2 million. Companies with an aggregated annual turnover of $2 million or above will continue to be subject to the current 30% rate on all their taxable income.
Importantly, the current maximum franking credit rate for a distribution will remain unchanged at 30% for all companies, maintaining the existing arrangements for investors, such as selffunded retirees.
5% Discount on Tax Payable by Unincorporated Small Businesses
Individual taxpayers with business income from an unincorporated business that has an aggregated annual turnover of less than $2 million will be eligible for a small business tax discount.
The discount will be 5% of the income tax payable on the business income received from an unincorporated small business entity.
The discount will be capped at $1,000 per individual for each income year, and delivered as a tax offset.
Immediate Deduction for Professional Expenses
The Government will allow businesses to immediately deduct a range of professional expenses associated with starting a new business, such as professional, legal and accounting advice.
Currently, some professional costs associated with a new business start-up are deducted over a five year period.
This measure will apply from the 201516 income year.
CGT Rollover Relief for Changes to Entity Structure
From 1 July 2016, small businesses with an aggregated annual turnover of less than $2 million will be allowed to change their legal structure without attracting a CGT liability at that point.
CGT rollover relief is currently available for individuals who incorporate but all other entity type changes have the potential to trigger a CGT liability. This measure recognises that new small businesses might choose an initial legal structure that they later find does not suit them when the business becomes more established.
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