Budget night is usually not usually marked out in our calendars but when it provides so much to small and medium business, maybe it will be in the future.
The 2015 Federal Budget brought in a range of measures that many commentators believe is a genuine belief that start-ups and small business growth are a potential answer to the reduction in the mining boom.
After reading the budget papers, we got thinking. What can you do to benefit your business based on these announcements?
First Up – What is a Tax Deduction?
You benefit from a tax deduction when you spend money that the ATO considers to be in connection with earning income. But not everything you spend is deductible in the year you pay for it. There are special time frames you can claim your deduction for assets like cars, computers and startup costs.
If you are a company, a deduction is worth around 30% of what you spend to help you make sales.
So if you buy something for $1,000 x 30% = $300, you will pay $300 less in tax.
1. Review your structure to make sure you are not at risk
One of the first great business achievements is growing to a size where the business is too big, isn’t in a tax advantageous position or too risky to run as a sole trader.
Assuming your business has value (what else have you been working for!) this would usually trigger Capital Gains Tax because it is as if one entity (you) are selling the value of the business to another entity (a company for example).
But not anymore. If you turn over less than $2m CGT will now not be applied in this situation beginning 1/7/16. So feel free to grow.
2. Start a Business
Opening up a business can be expensive. Accounting fees, legal fees and government charges (like trust stamp duty, company incorporation fees) can add up, and you don’t get a tax deduction straight away, the deduction drip feeds over a few years.
But not anymore, if you started a business after 1/7/15 these costs are now deductible straight away.
3. Increase Employee Morale
We all love gadgets. But the ATO used to charge Fringe Benefits Tax if you shouted your employee more than one device that did something similar to one they already have (think laptops v. tablets). FBT can be an administrative nightmare, increase compliance costs, and is an actual non-value add cost in itself.
But not anymore. If you turn over less than $2m any work related device you give your employees will be FBT free from 1/4/16.
You can also consider an Employee Share Scheme to drive engagement. Changes to the Capital Gains Tax rules will give recipients a more favourable outcome than before.
4. Increase efficiency, add a product line, upgrade old computers
Buying assets to use in the business are one of those deductions that you get to take over time.
But not anymore. If you turn over less than $2m you can get an immediate deduction for all assets bought for less than $20,000 starting from budget night (12/5/15).
Have a play with the “what does it mean to me” tool at http://bit.ly/Whatdoesitmeantome
5. If you sell equipment, run end of financial year promotions
Business will no doubt be trying to maximise the accelerated depreciation deduction (it only lasts a couple of years). So get in front of them and make it easy for them to buy your product.
6. Hire young talent
It’s hard to hire talent. When you find someone with natural abilities it can be financially draining to train them up.
A range of government assistance has been announced to help offer work experience for young job seekers. Have a think about what bit of admin, or process documentation type work you can offer a young keen worker.
Source: Budget Measures Budget Paper No.2 2015-16 a copy of which is available on the central Budget website at:www.budget.gov.au.