October 10, 2016
A Bill has been introduced in Parliament which proposes to:
- increase the small business entity turnover to $10 million from 1 July 2016;
- increase the unincorporated small business tax discount from 5% to 16% over a 10-year period;
- increase the turnover threshold to qualify for the lower company tax rate; and
- lower the company tax rate on a schedule over 11 income years, reaching a unified company tax rate of 25% in the 2026–2027 income year.
Small business entities with aggregated turnover of less than $10 million would be able to access a number of small business tax concessions, including, among others, immediate deductibility of small business start-up expenses, simpler depreciation rules and simplified trading stock rules.
The tax discount for unincorporated small businesses – introduced in the 2015–2016 income year – entitles individuals who are small business entities, or who are liable to pay income tax on a share of the income of a small business entity, to a tax offset equal to 5% of their basic income tax liability that relates to their total net small business income. This offset is capped at $1,000. Although the proposed increases in the offset would increase the amount of offset an eligible individual may claim, the offset would remain capped at $1,000.
Despite the $10 million turnover test outlined above, the $2 million threshold for the purposes of the small business capital gains tax concessions will be retained.
We also note that with a difficult Senate, the Coalition Government may make further changes in order to pass its Bill.