How The Federal Budget Can Actually Assist Business Owners To Save Tax

INTRODUCTION:

If you run a small business, you might have felt the federal budget did not offer much particularly after some of the changes to superannuation which in the main, were met with much disapproval for many reasons.

However, as a small business accountant, the increase in the limit of (aggregated) turnover threshold for small business entities from $2,000,000 to $10,000,000 does open up some wonderful saving opportunities from 1 July 2016. Of course saving tax also helps cash flow.

So what are some examples of the small business taxation concessions you will be able to take advantage of, if your turnover is less than $10,000,000?

Figure 1: There just might be a little gold in there for you in this year's federal budget?

1. increased deductions for depreciation

By qualifying as a small business entity (SBE), you can take advantage of being able to write your assets off more quickly and defer declaring profit on sale of assets (subject to balances) via pooling depreciation. You will also be able to claim immediate write-off for assets costing less than $20,000. Under the asset pool arrangement, you can claim 15% flat rate for new assets bought (no need to pro rata for days in the year) and 30% of the opening written down value thereafter.

2. simpler trading stock rules

This concession allows you to estimate your trading stock value at the end of the financial year without having to perform a stock take if the change in value from the start of the year to the end of the year is equal to or less than $5,000.

3. GST on a cash basis

As a small business entity you will be able to account for GST on a cash basis if it suits you. Your small business accountant should be able to assist you to determine whether this will be better for your cash flow or not and can confirm this when going through your three way budget with you.

4. simpler payg instalment calculations

Rather than trying to work out how much PAYG you need to pay using a somewhat complex formula, as a small business entity you can use the instalment the ATO gives you.

Figure 2: Less time spent working out complicated formulas.

5. prepayments

As a small business entity you will be able to claim an immediate deduction for prepaid expenses where the payment covers a period of 12 months or less that ends in the next income year. 

6. Access to extra FBT exemptions

If you are an SBE, car parking benefits can be exempt if:

• the parking is not provided in a commercial car park
• you are not a government body, a listed public company, or a subsidiary of a listed public company
• either your gross total income for the last income year before the relevant fringe benefits taxation (FBT) year was less than $10 million, or you were a small business entity for the last income year before the relevant FBT year. 

7. reduction in company taxation rate

CONCLUSION:

The federal budget has not been received with much approval and the superannuation changes have attracted all the headlines.

However, if you run a small business and had not been able to access the SBE concessions previously, small business accountants Sydney should be all over these changes to help you save taxation and increase your cash flow.

If you look closely at the changes, there could be a little gold in there for you!