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Reduction in the corporate tax rate

 
                       

The Turnbull Government's Ten Year Enterprise Tax Plan includes a plan to decrease the current tax rate as well as the discount afforded to unincorporated entities.

The company tax rate will be reduced from 30% to 25% over 10 years. The reduction in the corporate tax rate will initially target companies with a turnover of less than $10 million but this threshold will progressively increase to include all corporate entities by 2024.

The reduction in the corporate tax rate to 27.5% will commence from 1 July 2016 for small business.

     
Year Company annual aggregated turnover Tax rate
2016-17 Less than $10 million 27.50%
$10 million or more 30%
2017-18 Less than $25 million 27.50%
$25 million or more 30%
2018-19 Less than $50 million 27.50%
$50 million or more 30%
2019-20 Less than $100 million 27.50%
$100 million or more 30%
2020-21 Less than $250 million 27.50%
$250 million or more 30%
2021-22 Less than $500 million 27.50%
$500 million or more 30%
2022-23 Less than $1 billion 27.50%
$1 billion or more 30%
2023-24 All 27.50%
2024-25 All 27%
2025-26 All 26%
2026-27 All 25%
           

Tax discount for unincorporated small business entities – trusts, partnerships & sole traders

To complement the company tax rate reductions, the tax discount for unincorporated small businesses will increase from 5% to 16% over a ten year period.

The tax discount will increase on 1 July 2016 to 8% and will then increase to 10% in 2024-25, 13% in 2025-26 and finally reach a new permanent discount of 16% in 2026-27.

The current cap of $1,000 per individual will be retained for each income year.

Changes to the small business entity threshold

In what has been a significant win for small business, the small business entity turnover threshold will increase from $2 million to $10 million with effect from 1 July 2016. This increase in the threshold will allow a greater number of business access to a range of tax concessions including:

  • the simplified depreciation rules, including immediate tax deductibility for asset purchases costing less than $20,000 until 30 June 2017 and then less than $1,000;
  • the simplified trading stock rules, which give businesses the option to avoid an end of year stocktake if the value of the stock has changed by less than $5,000;
  • a simplified method of paying PAYG instalments calculated by the ATO, which removes the risk of under or over estimating PAYG instalments and the resulting penalties that may be applied;
  • the option to account for GST on a cash basis and pay GST instalments as calculated by the ATO;
  • immediate deductibility for various start-up costs (eg professional fees and government charges);  
  • a 12-month prepayment rule; and
  • the more generous FBT exemption for work-related portable electronic devices (e.g. mobile phones, laptops and tablets) – the FBT car parking exemption for small business already applies to entities with "annual gross income" of less than $10m. 
 
Accelerated depreciation – immediate asset write-off up to $20,000

 

Small businesses will be able to continue to claim an immediate tax deduction for assets purchased for less than $20,000 from 12 May 2015.  This concession will continue until 30 June 2017.

 

It should be noted that the $20,000 threshold applies on a per asset basis.

 

The immediate write-off will be available for the majority of capital asset types, including cars, machinery and equipment.

 

Importantly, the change in rules proposed in this budget mean that from 1 July 2016 entities with turnover of up to $10 million (up from $2 million) will be able to access the accelerated depreciation incentive.

 

 
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