Small Business entity threshold jumps to $10 million

In a significant win for business, the 2016/17 Federal Budget proposes to increase the small business entity turnover threshold from $2 million to $10 million from 1 July 2016. The reform will give a greater number of businesses access to a range of tax concessions such as:

• The lower small business corporate tax rate (27.5%);
• Simplified depreciation rules including immediate write-off for assets costing less than $20,000 that are acquired by 30 June 2017 and depreciation pooling provisions;
• Simplified trading stock rules;
• A different method of calculating PAYG instalments;
• The option of accounting for GST on a cash basis and paying GST instalments as calculated by the ATO;
• FBT exemptions (this would start from 1 April 2017); and
• A trial system of using a simpler business activity statement.

The current $2 million turnover threshold will be retained for access to the small business CGT concessions.

From 1 July 2016, the Government further proposes to increase the current 5% tax discount (Small Business Income Tax Offset – SBITO) to 8%.

The current tax discount (or SBITO) cap of $1,000 per individual for each income year will be retained.

Access to the discount will be extended to individual taxpayers with business income from an unincorporated business that has an aggregated annual turnover of less than $5 million.

Proposed date of effect: 1 July 2016