- Increase in the small business threshold from $2m to $10m turnover
- A reduction in the Company tax rates for small business to 27.5%
- Increase in the tax discount for unincorporated small business
- Simplified BAS reporting for small business
- Youth Jobs PaTH (Prepare, Trial, Hire) scheme
Increase in the small business threshold from $2m to $10m turnover
The Budget announced that the small business entity threshold will increase from $2m to $10m from 1 July 2016.
As a result, a business with an aggregated annual turnover of less than $10m will be able to access a number of small business tax concessions from 1 July 2016, 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;
- immediate deductibility for various start-up costs (eg professional fees and government charges);
- Availability of the option to account for GST on a cash basis and pay instalments calculated by the ATO;
The threshold changes will not affect eligibility for the small business CGT concessions, which will only remain available for businesses with annual turnover of less than $2m or that satisfy the maximum net asset value test (and other relevant conditions such as the active asset test).
A reduction in the Company tax rates for small business to 27.5%
The company tax rate for small business entities will reduce to 27.5% (from 28.5%) from the 2016-17 income year. The rate is set to reduce further to 27% in 2024-25 and then by 1 percentage point per year until it reaches 25% in 2026-27. The reduction will be progressively expanded to cover Companies of all sizes, not just small businesses.
Franking credits will continue to be calculated in the usual manner, ie by reference to the amount of tax paid by the company making the distribution. As a result, upon payment of dividends to shareholders, top-up tax may be required to be paid by individuals on a marginal tax rate than those listed above.
Increase in the tax discount for unincorporated small businesses
To complement the company tax rate reductions, the tax discount (or tax offset) for unincorporated small businesses (eg sole traders and partners in a partnership) will increase over a 10-year period from 5% to 10%.
The tax discount will increase to 8% on 1 July 2016, remain constant at 8% for 8 years, then increase to 10% in 2024-25, 13% in 2025-26 and reach a new permanent discount of 16% in 2026-27. The maximum value of the discount will remain at $1,000.
The Government also announced that more taxpayers will be able to access the tax discount. From 1 July 2016, access to the discount will be extended to individual taxpayers with business income from an unincorporated business that has an aggregated annual turnover of less than $5m (the current threshold is $2m).
BAS Reporting for Small Business
The Government is proposing to simplify BAS reporting requirements involving GST for small businesses, ie entities with less than $10m turnover.
The Treasurer’s press release states that the aim is that such entities “will be able to easily classify transactions, and prepare and lodge their BAS”. Unfortunately, there are no details as to how this will be achieved.
The press release does state that a trial of the “new simpler reporting arrangements” will commence on 1 July 2016. This measure will fully apply from 1 July 2017.
Youth Jobs PaTH (Prepare, Trial, Hire) scheme
From 1 April 2017, young job seekers, who need to boost their job-readiness, will participate in intensive pre-employment skills training within 5 months of registering with jobactive. The first 3 weeks of training will focus on skills such as working in a team, presentation, and appropriate IT literacy. A further 3 weeks of training will centre on advanced job preparation and job hunting skills.
In stage 2, the Government will introduce an internship programme with up to 120,000 placements over 4 years to help young job seekers who have been in employment services for 6 months or more to gain valuable work experience within a real business.
Job seekers and businesses, with the help of jobactive providers, will be able to work together to design an internship placement of 4 to 12 weeks duration, during which the job seeker will work 15 to 25 hours per week.
In addition to gaining valuable hands on experience in a workplace, job seekers will receive $200 per fortnight on top of their regular income support payment while participating in the internship. “This is real work for the dole”, the Treasurer said.
Businesses that take on interns will receive an upfront payment of $1,000, and will also benefit from the opportunity to see what a young worker can do and how they fit in to the team before deciding whether to offer them ongoing employment. [It is unknown at this stage if this payment will be taxable to the business.]
In stage 3, Australian employers will be eligible for a Youth Bonus wage subsidy of between $6,500 and $10,000, paid over 6 months, depending on the young person’s job readiness.
Businesses will have the flexibility to employ young job seekers either directly, through labour hire arrangements, or combined with an apprenticeship or traineeship.
In addition to these changes, existing wage subsidies including those for parents, Indigenous, mature age, and the long-term unemployed will be streamlined, making them easier for employers to access.