What the 2016-17 Budget means for you.

Small businesses just had a big win in the 2016-17 Federal Budget, with a $2.2 billion tax cut for SMEs. 

The Australian Government believes small businesses are the ‘engine room of our economy’ and will be what drives sustainable job growth.  So, the government is essentially introducing new initiatives to help SMEs spend more and grow bigger. But you have to know how to take advantage of these tax advantages in order to truly see the benefits.

Here are some key things you should know:

Tax Discounts

  • For incorporated businesses, the tax rate will be slashed to 27.5%, down from 28.5%, and the turnover threshold for SMEs will be increased from $2 million to $10 million. 
  • For unincorporated business with annual turnover of less than $5 million, the tax discount will be increased from 5% to 8% and up to a maximum amount of $1,000. 

What this means is that 1% less tax will be deducted from your business’s assessable income. This is a big change for businesses with revenue between $2million - $10million, however business operators need to pay attention to your revenue position if you are close to $10 million.

A few options could be considered to receive the benefit of tax reduction if you are close to $10 million revenue, such as delaying invoicing or the receipt of payments. A good accountant should be able to walk you through the best course of action for your business this year and for the future. 

Asset write-off

The federal government will offer an extension of the $20,000 instant asset write-off and other tax concessions for businesses turning over up to $10 million. 

The scheme, previously only available to businesses with turnover under $2 million, will allow small and medium businesses to deduct the full value of each asset purchased under $20,000 immediately, instead of claiming the deductions over the course of a few years.

So now is the time to invest in business assets you need to grow, like equipment and machinery. 

Cash bonuses

$840.3 million will be provided to SMEs that offer internships or hire young job seekers as part of the Youth Employment Package program. 

This means if your company takes on young job seekers (under the age of 25) for an internship program (which takes 4 to 12 weeks duration and works 15 to 25 hours per week), your business could receive cash bonuses of $1,000, and for formal employment, a bonus between $ 6,500 and $10,000 will be received. 

All businesses need to understand the Youth Employment Package in greater detail and you can find them here.

Simplified BAS arrangement

According to the new Budget, businesses with less than $10 million annual turnover will be able to enjoy the simplified Business Activity Statement (BAS) reporting requirements. 

In this situation, businesses will spend less time on filling forms by easily classify business transactions and lodge BAS.