For the purposes of the measures included in the Budget, small businesses are defined as those with an aggregated annual turnover of less than $2m.
Small businesses operating as companies will have their tax rate reduced by 1.5%, from 30% to 28.5%. The current maximum franking credit rate on dividends will remain unchanged at 30%.
Individual taxpayers who derive income from unincorporated small businesses (trusts, partnerships and sole traders) will be eligible for a tax discount (via a tax offset) of 5% of the tax payable on the business income received. This discount will be capped at $1,000 per individual per annum.
Both of the tax cuts will start from 1 July 2015.
Accelerated Depreciation – Immediate Deduction for assets costing less than $20,000
From 7.30pm (AEST) 12 May 2015 until 30 June 2017, small businesses can immediately deduct assets they start to use, or install ready for use, that cost less than $20,000. Previously an immediate deduction was only available for assets costing less than $1,000.
Assets costing $20,000 or more will continue to be placed in the small business simplified depreciation pool and depreciated at existing rates. However, if the pool balance falls to less than $20,000 (currently $1,000) during the period of 12 May 2015 to 30 June 2017, the balance will be deducted immediately.
Capital Gains Tax roll-over relief for changes to entity structure
From 1 July 2016, small businesses that alter their legal structure will be permitted to do so without incurring a Capital Gains Tax (CGT) liability. While many small businesses could currently restructure in a manner that does not result in a CGT liability, the changes will allow more small businesses access to the CGT roll-over relief.
Fringe Benefits Tax & electronic devices measures
From 1 April 2016 a Fringe Benefits Tax (FBT) exemption will apply for small businesses that provide employees with more than one qualifying work-related portable electronic device.
Currently, an FBT exemption is only available for multiple devices where each device performs a substantially different function.