Small business concessions legislation is finally passed
The long-awaited legislation to give effect to small business concessions announced in last year's 2015-16 federal budget has finally been passed, which means the tax planning options for the 2017 year for many small business owners have become clearer.
At the heart of the changes is an increase in the turnover threshold that dictates those businesses that are eligible for the small business concessions. From July 1, 2016, the turnover threshold has increased from under $2 million up to a turnover of less than $10 million.
The only tax concessions that the increased threshold does not apply to are the small business income tax offset, which will have a turnover threshold of under $5 million; and the small business capital gains tax concessions, with the turnover threshold remaining at under $2 million.
The most important tax concessions for businesses that previously were ineligible due to having a turnover of more than $2 million include:
- the immediate write off of assets costing less than $20,000 that were purchased after July 1, 2016;
- a tax deduction for prepaid expenses where the payment covers a 12 months or less period that ends in the next financial year;
- the ability to estimate the value of trading stock on hand at the end of each financial year when the change in value is estimated to be less than $5000;
- tax relief on capital gains tax assets, trading stock, revenue assets and depreciating assets transferred from one business structure to another; and
- a tax deduction for business start-up costs including professional legal and accounting advice.
Because of the time taken to pass the legislation implementing last year's budget measures, the Turnbull government announced in this year's budget that the immediate tax deduction for assets costing less than $20,000 would be extended for 12 months.