A Good News Budget For Small Business

With the Federal election campaign now in full-swing, Scott Morrison's May 3^rd Budget is old news now, right?

Wrong.

If you're running a small business (or you know someone who is) - pay attention! You have less than a month to take advantage of the instant asset write off program, if you want to enjoy the tax benefits this calendar year.

Changes to that policy and others announced in the 2016 federal budget are set to take effect on July 1 - this is our summary of how the changes announced will impact your small business.

Changes to the $20k Instant Asset Write-Off

Small businesses with an aggregate annual turnover of less than $10 million dollars will now be able to access the $20k Instant Asset Write-Off.

As announced in the 2016 Budget, from July 1 2016 the eligibility criteria for accessing the $20k Instant Asset Write-Off has risen from $2M in annual turnover to $10M.

This increase allows approximately 870,000 small businesses (an additional 90,000 since increasing the threshold) to receive an immediate tax deduction on each asset they purchase costing less than $20,000.

We covered all you needed to know about the $20k Instant Asset Write-Off when it was announced in 2015; click here to read our 2015 Budget Recap.

The $20k Instant Asset Write-Off is available until the 30th of June, 2017.

Lowering of the company tax

The Government has announced a path for lowering the corporate tax rate for all companies to 25% over the next decade.

Small businesses with an annual turnover of less than $2M will have their tax rate cut from 28.5% to 27.5% from July 1 2016. The annual turnover threshold will then be progressively increased for businesses until 2023-24, when there will be no threshold and all businesses will be taxed at the 27.5% rate (see below).

When will your business qualify for the reduced tax rate?

The table below shows the threshold for a business's annual turnover under which they will be eligible for the 27.5% tax rate.

Source: Budget.gov.au

And another drop in 2024/25

While it's still a while away, there's good news planned for companies of all sizes in 2024/25, when the corporate tax rate will be reduced to 27%, continuing to drop by 1% every year until it reaches 25% in the 2026-27 income year.

More businesses will be able to choose how they account for GST

With the increase to the small business income threshold, more businesses will have the option to account for GST on a cash basis. From 1 July 2016, businesses turning over less than $10 million annually will have the option to account for GST on cash basis, or to pay GST by instalments.

The ATO offers some helpful guidelines for businesses trying to choose which accounting method is right for them.