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  • #991722
    James Millar
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    So what are everyone’s thoughts on this year’s budget? Clearly it was intended to prime small business and encourage spending and investment. Will it have the desired effect?

    To recap items relevant to small business are

    1. For small business entities turning over less than $2m pa, the $20,000 immediate write off (tax deduction) of capital assets acquired between 7.30pm last night (12th May 15) through to 30 June 2017. This is a big win. If you recall this has fluctuated between $1000 and $6500 and back $1000. Go forth and spend!

    2. Companies that are small business entities will receive a reduction in the company tax rate to 28.5%. Non company structure (Sole Prop) will receive a 5% tax discount up to $1000 in value.

    3. Minor improvements to FBT for portable devices. Big deal (not)

    4. Concessions for rolling over (transferring) a business from sole prop to a trust. Previously this was mainly available in rolling to a company in certain cases. This is a big win for those wanting to minimise start-up costs by setting up with a cheaper structure first before transitioning to something else. A good outcome for many here.

    5. Concession for employee share schemes to defer the taxing point of discounted shares issued. This is particularly important in the tech space or those entities using equity incentive remuneration as a substitute for precious cash flow salaries. For a long time we have been uncompetitive with these provisions (now more in line with USA). Actually pretty good win.

    6. Corporations Act concessions for crowd funding arrangements. Not such a big deal because frankly if your business model relies on this then you are in trouble.

    All in all a decent budget for small business. Nothing ground breaking but the $20k write off is decent. If you’ve purchased anything recently tough luck (although a return and refund and repurchase may be on the cards :)

    Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900
    #1182931
    bb1
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    JamesMillar, post: 213465, member: 5318 wrote:
    1. For small business entities turning over less than $2m pa, the $20,000 immediate write off (tax deduction) of capital assets acquired between 7.30pm last night (12th May 15) through to 30 June 2017. This is a big win. If you recall this has fluctuated between $1000 and $6500 and back $1000. Go forth and spend!

    James just to clarify, the way I read your post its $20k over that period. Or is 20K per financial year.

    #1182932
    James Millar
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    bb1, post: 213475, member: 53375 wrote:
    James just to clarify, the way I read your post its $20k over that period. Or is 20K per financial year.

    Its $20k per asset for any capital asset acquired during the period. There is no limit on how many. So if you are starting a new business and need to buy 5 cars at $18,000 each its fine to claim 100% of all (subject to private use adjustments). This applies not just for vehicles but any capital assets.

    Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900
    #1182933
    bb1
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    JamesMillar, post: 213478, member: 5318 wrote:
    Its $20k per asset for any capital asset acquired during the period. There is no limit on how many. So if you are starting a new business and need to buy 5 cars at $18,000 each its fine to claim 100% of all (subject to private use adjustments). This applies not just for vehicles but any capital assets.

    Thanks, that will make my 2 new Ride On’s look even more enticing.

    #1182934
    Netorigin
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    Another change I read about (which I thought was really good) was the stream lining of the business registration process – giving people a single online site to register for an ABN, company structure, trading name, GST etc. At the moment you need to go to a few different sites/portals to get this done.

    Cheers,
    Blake

    #1182935
    Vanders
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    Just wondering if you could clarify the $20,000 write off for me. As I don’t really understand how the write off works.

    I spend $20,000 on a new tool or trailer etc. what does the write off mean?

    I do receive the purchase price back at tax time?

    Or only a percentage?

    Is it only at tax time I can write off an asset?

    Thanks

    #1182936
    James Millar
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    Vanders, post: 213493, member: 65471 wrote:
    Just wondering if you could clarify the $20,000 write off for me. As I don’t really understand how the write off works.

    I spend $20,000 on a new tool or trailer etc. what does the write off mean?

    I do receive the purchase price back at tax time?

    Or only a percentage?

    Is it only at tax time I can write off an asset?

    Thanks
    “write off” is simply another term of income tax deduction. That is a deduction from your income for the period. The value of the tax deduction is best measured by reference to your personal marginal tax rate. If buy a $10,000 asset and claim a deduction and lets say your tax rate was 30% then you would essentially get a tax benefit saving of $3,000. So in effect the asset has cost you $7,000 and the ATO have paid the other $3000.

    Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900
    #1182937
    I.T. Guaranteed
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    Is the 5% discount calculated on just the business component of the tax bill or on the entire tax payers tax bill?

    #1182938
    James Millar
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    I.T. Guaranteed, post: 213513, member: 53322 wrote:
    Is the 5% discount calculated on just the business component of the tax bill or on the entire tax payers tax bill?
    No doubt it will be based on the business profit not other personal income. Really its just a rebadged entrepreneurs tax offset that we previously had.
    Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900
    #1182939
    James Millar
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    And at the risk of being too bearish the 1.5% company tax rate reduction doesn’t really provide a saving. It reduces the company tax and therefore also reduces the tax credit attached to dividends paid out. Given individual tax rates haven’t reduced it simply means shareholders pay the extra 1.5% in their personal returns.

    Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900
    #1182940
    wildleafjen
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    I’m still a bit confused if the $20k deduction applies if you’re a sole trader…. I have registered an ABN but am just starting out my small business making and selling natural skincare products. I’m expecting my revenue won’t be more than $10-20k in the first year, but I’d like to purchase a bigger second hand car to see suppliers and take to markets, etc.

    #1182941
    James Millar
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    wildleafjen, post: 213538, member: 65866 wrote:
    I’m still a bit confused if the $20k deduction applies if you’re a sole trader…. I have registered an ABN but am just starting out my small business making and selling natural skincare products. I’m expecting my revenue won’t be more than $10-20k in the first year, but I’d like to purchase a bigger second hand car to see suppliers and take to markets, etc.

    You need to carefully consider the timing of your purchase to maximise the value of the tax benefit. For example if you had $20k business income and say $2k expenses you would have a business profit of $18k which would be your taxable income. At that level of income you would pay no tax so if you went and purchased the $20k asset in that year the value of the tax benefit would be $0. Alternatively if you buy the asset in the following financial year when your business income is $40k and your expenses are say $4k then the vale of the extra $20k tax deduction from this would be circa $5k as an estimate. The higher your tax bracket the more valuable the tax deduction is.,Get your timing right.

    Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900
    #1182942
    wildleafjen
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    Great, thanks for the clarification! I now realise I should have mentioned I am also employed full-time by a company, earning around $100k gross p.a. How would this affect the tax benefits?

    #1182943
    James Millar
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    wildleafjen, post: 213546, member: 65866 wrote:
    Great, thanks for the clarification! I now realise I should have mentioned I am also employed full-time by a company, earning around $100k gross p.a. How would this affect the tax benefits?

    It means that the timing of the purchase is less of an issue because you will be on a high marginal tax rate at all times that you have that job.

    It’s also worth pointing out that the sole proprietor non-commercial loss rules still apply to this new $20k write off measure. So in your case if you have very little business income and lots of business tax deductions including a large say $20k asset write off which together produce a business loss – the non-commercial loss rules may prevent you from claiming that loss against your other employment income in that year. The loss would be carried forward to future years.

    So in short anyone considering accessing the $20k write off measure should keep in mind that the tax benefit (or some part) may be pushed forward into a subsequent tax year.

    Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900
    #1182944
    wildleafjen
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    Perfect, thanks. I’m planning to see an accountant soon to get my head around all of these kinds of things, but your explanation is just what I needed in the meantime.

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