Increase to the small business entity turnover threshold

The small business entity turnover threshold will be increased from $2m to $10m, effective from 1 July 2016.
The increased threshold means that businesses with an annual turnover of less than $10m will be able to access existing small business income tax concessions including :
  • lower small business corporate tax rate (see rates here)
  • simplified depreciation rules including the instant asset write off threshold of $20,000 available until 30 June 2017
  • simplified trading stock rules
  • option to account for GST on a cash basis and pay GST instalments as calculated by the ATO
  • simplified method of paying PAYG instalments calculated by the ATO
  • simplified GST reporting, from 1 July 2017, and
  • other tax concessions such as the extension of the FBT exemption for work-related portable electronic devices available from 1 April 2016 and the immediate deduction of professional expenses.
The increased $10m threshold will not be applicable for accessing the Small Business CGT concessions, which will remain available only for those businesses with a turnover of less than $2m or those who satisfy the $6m maximum net asset value test.

Unincorporated small business tax discount

The unincorporated small business tax discount will be increased in phases over 10 years from 5% to 16%. The current tax discount of 5% will increase to 8% from 1 July 2016.  This is available to individual taxpayers with income from an unincorporated business that has an aggregated annual turnover of less than $5 million (up from $2 million currently).
The tax discount will remain at 8% until 2023-2024 and then increase to 16% in the period to 2026-2027, in line with the corporate tax rate reductions.
The individual cap of $1,000 in tax discounts per individual for each income year will be retained.

 

Division 7A Amendments 

From 1 July 2018 targeted amendments will be made to improve the operation and administration of integrity rules of Division 7A.
The amendments will include:
  • A self-correction mechanism for inadvertent breaches of Division 7A
  • Appropriate safe-harbour rules to provide certainty
  • Simplified Division 7A loan arrangements
  • A number of technical adjustments to improve the operation of Division 7A and provide greater certainty

Currently, corrective action for inadvertent breaches of Division 7A can only be undertaken at the discretion of the ATO.