2015 Federal Budget: Small Business and Start Ups insights

Small business was one of the biggest winners from the 2015-16 Federal Budget with the Federal government announcing a “$5.5 Billion Jobs and Small Business package” that will provide support to small businesses by delivering a number of targeted measures and tax cuts.


It is expected that these measures will encourage small business to increase capital investment and focus on entrepreneurship and growth, which is hoped will translate to improved productivity in the broader economy.

Specifically, the Federal Government has announced three game changing measures that will apply to small businesses entities, which are entities that that have an aggregated annual turnover of less than $2 million. These measures are outlined below:


1. Immediate deductions for assets costing less than $20,000

Small business will be entitled to an immediate deduction when they acquire depreciating assets costing less than $20,000 (this is an increase of $19,000 on the current asset threshold). Any assets over $20,000 can be pooled and depreciated at the same rate. These pooled assets will be depreciated at 15 per cent in the first income year and 30 per cent per year thereafter. If the value of the pool is below $20,000 it can be immediately deducted until the end of June 2017.

Small businesses entities will be able to access the immediate asset write off and accelerated depreciation for the majority of asset types. Only a small number of assets will not eligible (such as horticultural plants and in-house software).

This measure will apply to assets acquired between 7.30pm 12 May 2015 and 30 June 2017.


2. A reduction in the company tax rate by 1.5%

From 1 July 2015, the company tax rate for companies that qualify as a small business entity will be reduced from 30% to 28.5%. Importantly the franking credit rate for small business companies will remain at 30%, which will mean that franking credits arising on profits before 1 July 2015 will be fully recoverable.


3. 5% discount for small unincorporated businesses

From 1 July 2015, unincorporated small business entities will be entitled to a 5% tax offset capped to a maximum value of $1,000. This announcement should be well received by the small business community as the previous announcement of the 1.5% tax cut for small business in the 2014-15 Budget was widely criticised for being limited to companies.


In addition to these three measures the Federal Government has announce a number of other changes that will provide support to small and start-up businesses, which are outlined below.


Encouraging start ups

Under the current law, new businesses will not be able to immediately deduct certain capital costs incurred on starting up a business. These costs, such as such as legal expenses on establishing a company, trust or partnership would ordinarily be required to be spread over a five year period. As part of the package to support new and small business the Government has announce that new businesses will now be able claim an immediate deduction for such professional expenses from the 2015-16 income year.


Enhanced access to business restructure for small businesses

The Government has announced that small businesses with aggregated turnovers less than $2 million will be able to change legal structure without incurring capital gains tax (CGT) liability. This will provide small businesses the flexibility to consider whether their current legal structure is appropriate for their business, and where it is not, restructure without adverse tax consequences. This new measure will apply from the 2016-17 income year.


Cutting red tape for small business

Various initiatives to reduce ‘red tape’ have also been announced. These include:

  • Changes to the entry thresholds for Pay-As-You-Go
  • Allow a fringe benefits tax (FBT) exemption from 1 April 2016 for providing employees with more than one qualifying work-related portable electronic device. Currently an exemption only applies when the electronic devices are used primarily for work purposes and have substantially different functions. 
  • The government has also announced the release of a “consultation paper on potential changes to the Corporations Act to reduce any unnecessarily burdensome or restrictive regulatory requirements for small business”.

In addition to this a $32.4 million in funding has been put aside to develop a single online portal for both business and company registrations. This is to simplify the registration process that is currently in place.


Access to crowd funding

The Government has made a commitment to provide $7.8 million of funding to ASIC to develop and monitor a regulatory framework to facilitate the use of crowd-source equity funding (CSEF). This will mean that small business and other entrepreneurial enterprises will have access to crowd funding to develop and growth their business.