2015 Federal Budget – What does it means for you?

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2015 Federal Budget

How will you be affected?

The Federal Government’s second budget has been anointed the ‘Fair Go’ budget. What it can really be described as is short-term relief with no major focus on long-term strategy for Australia’s future. The main feeling from this budget is that of being a little underwhelmed, with the obvious feeling being the government focusing on the three year electoral cycle.

It is a significant shift from the austerity measures taken in last year’s episode, with a view towards stimulating the economy through small business. Some significant changes have been made in small business, with a view to business ‘borrowing and spending’.

These include the following:

  • Instant Asset Write-off
  • Company tax rate cut
  • Formation Expenses
  • Fringe Benefits Tax Exemption
  • Rollover Relief
  • Changes to Employee Share Schemes

Instant Asset Write-off

All small businesses will get an immediate tax deduction on items with a value of up to $20,000. The current level sits at $1,000. This limit applies to each individual item (asset) with there being no limit to how many items it can be applied to.

This measure is in effect from Budget Night (May 12, 2015) to the end of June 2017.

The key advantage of this is to allow small business to work smarter and more efficiently with new technology. This will no doubt factor heavily in small business end of financial year tax planning in the next 6 weeks or so.

Company tax rate cut

The much promised, long awaited cut to the corporate tax rate has finally arrived. Small business companies will from 1 July 2015 pay a company tax rate of 28.5%, with a view to cutting the rate to 25% in successive budgets.

The Federal Government estimates that this measure will assist up to 780,000 incorporated small businesses.

Companies with a turnover of more than $2 million will have still have to pay tax at the current 30% rate.

Formation expenses

Small businesses will now be able to immediately deduct all setup costs, including the cost of legal and accounting advice. Previously this type of expenditure needed to be written off over five years under the ‘Blackhole Expenditure’ provisions.

The Federal Government has also announced the creation of the Australian Business License and Information Service (ABLIS) to streamline the registration processes for new business. This is expected to be up and running by mid-2016.

Fringe Benefits Tax Exemption

Under existing rules, each employee is only allowed an exemption from FBT for one portable electronic device, per year. This rule is now extinct thanks to a new exemption on all work-related portable electronic devices.

This means that for the tech-savvy among us who use a smartphone, tablet and/or laptop computer, you can purchase all within the same year, without incurring an FBT liability. Great news for those who choose to embrace technology and stay connected.

Rollover Relief

Businesses that commence only to find they have elected the wrong legal structure will now be able to access Capital Gains Tax rollover relief. This will occur when they need to change legal structures but retain the same beneficial ownership. A huge win for small businesses.

Changes to Employee Share Schemes

Significant changes are on the way for Employee Share Schemes in Australia. Stay tuned to our blogs for a more in-depth, separate coverage of this topic in the coming days.

Want to know more about the 2015 Federal Budget? Click here.