THE $20,000 TAX DEDUCTION FOR CAPITAL ITEMS 

You can fast track deduction of plant and equipment purchased from your business income, maximum up to $20,000 per item.

 Eligibility

  • Pass the 'Small Business Entity (SBE) test' i.e.
    • You need to be running a business (very critical).
    • Your current year or prior year turnover (grouped with entities connected with you) should be less than $2,000,000.
  • Purchase (and hold ready for use) an eligible item of Plant or Equipment of less than $20,000 (net of GST) between 7.30pm (AEST) on Tuesday 12 May 2015 and 30th June 2017.
   

 Strategies & Pitfalls
  • Both new and second hand items are allowed. Purchases from related entities are also allowed.
  • Item(s) should be purchased and installed ready for use within the above period of eligibility.
  • Item should be a plant or equipment and be used for business purposes. Private use items would not qualify, nor would renovations and fit-outs.
  • Each item should be less than $20,000.  Items in groups can be counted separately (e.g. set of furniture items or set of office chairs). One single item can not be broken into multiple items to be eligible (e.g. on large single item equipment invoiced into non separable components).
  • If opening balance of the SBE pool items is less than $20,000, the whole pool can be claimed as 100% deductible.
  • Non business entities including investment companies and bucket companies do not qualify. The claiming entity should be in business.
  • Personal Services Entities (PSEs) which do not pass Personal Services Business test (PSB) do not qualify since they are not taken to be running a business.  Similarly contractors need to pass PSB tests to qualify.
  • If you are a sole trader, you can claim only up to the portion of business use. However, full value of the item should be less than $20,000. Thus a motor vehicle costing $30,000 and used 50% for business can not be claimed to the extent of $15,000 in one go. Normal 15% depreciation on $15,000 would apply.

  THE 28.5% CORPORATE TAX
Your corporate tax rate on business income reduces from 30% to 28.5%
Eligibility
  • Pass the 'Small Business Entity (SBE) test i.e.
    • You need to be running a business (very critical).
    • Your current year or prior year turnover (grouped with entities connected with you) should be less than $2,000,000.
  • You are  a Pty Ltd Corporate entity.
  • Applies from Financial Year 2015/16.
Strategies & Pitfalls
  • Non business entities including investment companies and bucket companies do not qualify. The claiming entity should be in business.
  • A non corporate entity (sole traders, partnership or trusts) do not qualify.
  • An otherwise investment company which also runs a business (of say providing management services) could qualify provided the entity passes PSI-PSB test.
  • While the tax rate reduces to 28.5%, Franking Credit Rate continues at 30%.

 

THE 5% BUSINESS TAX REBATE CAPPED AT $1000
Your tax on business income is rebated by 5% with a cap of $1,000

Eligibility

  • Pass the 'Small Business Entity (SBE) test' i.e.
    • You need to be running a business (very critical)
    • Your current year or prior year turnover (grouped with entities connected with you) should be less than $2,000,000
  • Be a sole trader or an individual running a business through partnership.
  • Applies from Financial Year 2015/16
        

Strategies & Pitfalls

  • Contractors need to pass PSI – PSB test to qualify. If you do not pass the test, you are not taken to be running a business.
  • Rebate equals to 5% of your business tax liability limited to $1000.
   
IMMEDIATE DEDUCTION - BLACK HOLE COSTS
Start-ups will be able to claim an immediate deduction for professional expenses associated with starting a business

 Eligibility

  • You are setting up a new business.
  • You satisfy SBE test in first year of operations.
  • You incur professional costs associated with starting the business (including accounting and legal fee to set up a business structure).
  • Applies from Financial Year 2015/16.

 Strategies & Pitfalls

  •  You will be able to claim these costs in first year of your business operations instead of 5 years.
  

FBT - MULTIPLE ITEMS OF SIMILAR USE
 You can now provide multiple portable electronic devices to your employees (including directors) without additional Fringe Benefit Tax.

 Eligibility

  • Pass the 'Small Business Entity (SBE) test' i.e.
  • You need to be running a business (very critical).
  • Your current year or prior year turnover (grouped with entities connected with you) should be less than $2,000,000.
  • Applies from FBT year starting from 1st April 2016.

 Strategies & Pitfalls

  • Your business can now provide multiple electronic devices of similar use without incurring FBT Tax.
  • The additional items (e.g. mobiles, laptops and notepads) can have similar use, as long as they are predominantly used for business.
  • FBT Tax can otherwise be as high as 96% of the item purchased.