Please be advised the pending legislation to increase the SBE threshold from $2 million to $10 million received royal assent on 19/05/2017 and is therefore now law, effective 01/07/2016.
This means if all of your groups' entities turnover together is less than $10 million for the 2016-17 year, the following applies to your business:
- Income tax – If your business is in a corporate structure, the income tax rate for 2016-17 is 27.5%, rather than 30%.
- Depreciation – You can deduct the cost of any assets purchased for $20,000 (excl. GST) between 01/07/2016 and 30/06/2018, without the need to depreciate them over their useful life. This gives you an upfront tax benefit in the year of purchase. All other assets can be added to an 'SBE pool', which means you can claim a flat 15% in the first year and 30% every year after that.
- GST – You are eligible to report and pay GST on a cash basis, rather than accruals.
- PAYG instalments – Going forward, you can use the instalment amount option to calculate your PAYGI, rather than having to use the rate method.
- Prepaid expenses – You can claim an immediate deduction for prepaid expenses, where the prepayment covers a period of 12 months or less, that ends in the next income year.
- FBT on portable items – Your business has an exemption from fringe benefits tax where work-related devices such as mobile phones, laptops and tablets are provided to employees.
- Simplified trading stock rules – If the difference between your business' opening stock and a reasonable estimate of the stock on hand at the end of the year is less than $5,000, you do not have to conduct a stocktake and do not have to account for any changes in the value of your trading stock.
- Maximum franking credits – If paying dividends from your company that is an SBE, the maximum rate these dividends can be franked at is the tax rate being paid by that company in the financial year (i.e. in 2016-17, dividends paid by an SBE will be franked at 27.5%). Prior to 01/07/2016 the franking rate was 30%, irrespective of the applicable company tax rate.
If you have any questions regarding the above, please contact our office.