Tax Concessions Changes for Businesses
Business Tax Update │September 2017
This Financial Year, several changes have been made to tax offsets and small business tax concessions 2017, which could affect your tax allowances. The changes are effective from 1 July 2016, and will apply from your 2017 tax return.
These tax changes include:
1. Expanded access to small business concessions
More businesses are now eligible for most small business tax concessions. From 1 July 2016, a range of small business tax concessions became available to all businesses with turnover less than $10 million (the turnover threshold). Previously the turnover threshold was $2 million.
The $10 million turnover threshold applies to most concessions, except for:
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The small business income tax offset, which has a $5 million turnover threshold from 1 July 2016
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Capital gains tax (CGT) concessions, which continue to have a $2 million turnover threshold.
The turnover threshold for fringe benefits tax (FBT) concessions increased to $10 million from 1 April 2017.
2. Increased small business income tax offset
You can claim the small business income tax offset if you are a small business sole trader, or have a share of net small business income from a partnership or trust.
From the 2016–17 income year, the small business income tax offset:
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Increased to 8%, with a limit of $1,000 each year
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Applies to small businesses with turnover less than $5 million.
The tax offset increases to 10% in 2024–25, to 13% in 2025–26 and to 16% from the 2026–27 income year. The amount of your offset is based on amounts shown in your tax return.
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Company tax rate cut for small businesses
For the 2016–17 income year, the company tax rate for small businesses decreased to 27.5%. Companies with turnover less than $10 million are eligible for this rate.
The maximum franking credit that can be allocated to a frankable distribution has also been reduced to 27.5% for these companies – in line with the company tax rate. The reduced company tax rate of 27.5% will progressively apply to companies with turnover less than $50 million by the 2018–19 income year. From 2024–25, the rate will reduce each year until it is 25% by 2026–27.
If you lodged your 2016–17 company tax return early:
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If your turnover is less than $2 million, the ATO will amend your return for you and apply the lower tax rate.
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If your turnover is from $2 million to less than $10 million, you will need to review your tax return and lodge an amendment if required.
A Bill was tabled on 11 May 2017 to gradually extend the reduced company tax rate to all companies.
Tax rate cuts – “not meant to apply to passive investment companies”
On 4 July 2017, the Minister for Revenue and Financial Services, Ms Kelly O’Dwyer MP, issued a statement on the tax rate cuts for small companies.
Minister O’Dwyer said, “Reports today that the ATO has broadened the interpretation of company tax cuts are premature … however, the policy decision made by the Government to cut the tax rate for small companies was not meant to apply to passive investment companies.”
Minister O’Dwyer said the ATO has issued a draft ruling and will in due course provide other guidance.
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Instant asset write-off extension
Australia’s 3.2 million small businesses can continue to purchase equipment up to $20,000 and write it off immediately thanks to legislation passed by the Senate on 15 June 2017, advised Small Business Minister Michael McCormack recently. The period in which small business entities can access the instant asset write-off has been extended by 12 months to 30 June 2018. It was originally intended to end on 30 June 2017.
The Small Business Minister said recent tax cuts for small business – which delivered a 27.5% tax rate – also redefined ‘small business’, meaning more Australian businesses are now eligible for the instant asset write-off.
More businesses are now eligible to buy equipment (new or second hand) up to $20,000 and write it off immediately after this legislation passed the Senate. Multiple claims can be made under the program.
‘Small business’ has also been redefined for tax purposes as having a turnover less than $10 million, up from $2 million.
Find more at the ATO website using the links below or speak with your local MAS Tax Accountant.
For more information or to make an appointment, please contact us below or call us on 1300 627 829
Source: TaxWise 2017
