We are at the start of another financial year so now is a great time to review any tax changes that may impact you or your business. Below we highlighted what tax changes are new, old or still just sitting on the fence.
1. Small Business Tax breaks
The Government snuck in a few tax changes for small businesses before the end of the financial year. Businesses with an aggregated turnover of less than $2 million a year can now benefit from:
- Reduced tax rates from 1 July 2015 – for companies, the tax rate has been cut to 28.5% (down 1.5%) and the owners of other unincorporated businesses will benefit from a 5% tax rate cut, capped at $1,000.
- Immediate deduction for depreciable assets costing up to $20,000 that were purchased after 12 May 2015 (until 30 June 2017).
2. Employee Share Schemes (“ESS”)
Legislation has now been passed which provides access to tax concessions and simplified valuation methods for start-up companies issuing ESS interests issued from 1 July 2015. The legislation also provides deferrals for the taxing point of rights and increases the ownership test threshold.
1. Temporary budget deficit levy
The 2% temporary budget deficit levy on people earning over $180,000 continues to be in force, affecting tax rates across the board. The levy is legislated to cease from 1 July 2017. In the meantime, it will affect rates including the top marginal tax rate, Fringe Benefits Tax and the tax payable on various superannuation withdrawals and employment termination payments.
2. Superannuation contributions
- For the 2016 financial year, the concessional contribution limit is set to $30,000 for those aged less than 49 and $35,000 for those 49 and over; and
- The bring forward non-concessional cap is set to $540,000 (over a three year period) from 1 July 2014.
3. Thin Capitalisation updates
From 1 July 2014 entities with offshore debt will no longer need to consider the Thin Capitalisation provisions provided their debt deductions are less than $2 million (increased from $250,000).
STILL ON THE FENCE
1. Motor Vehicle claims
The Government proposed changes in the budget to introduce a flat rate of 66cents per km for all vehicle types, together with eliminating two of the lesser used motor vehicle calculation methods. These changes are set to apply from 1 July 2015 however are yet to be passed.
2. Small Business Tax breaks
While the small business tax breaks above have been legislated, two other proposed measures still remain on the fence:
- Immediate deduction for professional expenses for start-ups – proposed to apply from 1 July 2015
- CGT roll-over relief for changes in entity structure – proposed to apply from 1 July 2016
3. Research & Development (“R&D”) Tax Incentive
The Government intends to change the R&D Tax Incentive rates to 43.5% effective from 1 July 2014 for eligible entities with a turnover under $20 million per annum (and not controlled by an income tax exempt entity) and 38.5% for all other eligible entities. The rates currently legislated are 45% and 40%, respectively.