Tax tips for Aussie small businesses

Thursday 28 May 2015

Article by Kirsty Timsans

In a bid to boost small businesses, the recent Budget has unveiled a number of tax measures including a fall in the tax rate of all incorporated small businesses from the current 30% to 28.5% from 1 July 2015.

Tax tips for Aussie small businesses

Small businesses who aren’t operated through a company, such as sole traders, or those which operate through a partnership, trust or non-corporate vehicle will receive a 5% discount on the tax payable on their profits from the business (up to a maximum of $1,000 per individual). This discount will be given in the form of a tax offset in the year-end tax return.

With the tax year end rapidly approaching, tax experts H&R Block said that small businesses should plan accordingly to take advantage of the changing tax rate. For instance, H&R Block advise that if small business owners are in a position to defer taxable income until the start of the new tax year (by invoicing late or delaying completion of a job), this revenue will be taxed at the lower rates come the beginning of July.

Also, if small business owners are able to pay additional bills before the end of the current tax year, or even prepay some of next year’s costs, they can lock in a deduction at the current, higher rates of tax.

Recent surveys indicate that many taxpayers are intending to take advantage of the new instant deduction for assets acquired up to the value of $20,000, however, not all planning to take up the tax break may be eligible to receive it.

With no legislation available and limited guidance from the ATO, H&R Block has sounded a note of caution by providing key tips to minimise the chances of the ATO challenging your deduction if you’re planning to take up the tax break:

1.Only small businesses qualify

The ATO will expect to see evidence of real business activities and will keep an eye on post-Budget night applications for ABNs.

2. Understand what the tax break is

It isn’t a cash handout. For example if you buy an asset for $10,000, the ATO won’t give you $10,000 to reimburse you.

3. Asset must be ready for use

Before the deduction can be claimed, it must be installed and ready for use. Therefore, you need to be aware of those assets that might require you to wait to be delivered and installed.

4. Asset has to be used in the business

To claim the full deduction, the asset has to be used solely on the business. You can still claim the deduction if there is an element of personal use, but the deduction needs to be pro-rated to represent the element of personal use.

5. Second-hand assets

You can claim a deduction for second hand assets.

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