The 2015 Budget, released on May 12, contained four announcements of specific interest to business owners. If you’re a small bakery business owner, read on.
Some of these will impact nearly all small bakery businesses, while other points may only impact a small percentage. Still, if you’re one of those small businesses with a turnover of less than $2 million, you need to know the facts.
Cuts to the amount of tax payable
Incorporated (Company) small businesses are set to receive a 1.5 per cent reduction in the rate of tax paid on their net profit. This will reduce the tax rate to 28.5 per cent from July 1, 2015, meaning small businesses can adjust their PAYG Instalment rate from the September 2015 business activity statement (BAS).
The 70 per cent of small businesses that are unincorporated (sole traders, partnerships and trusts) will receive a tax discount. The discount will be 5 per cent of the income tax due, capped at $1000 per individual for each income year, and delivered as a tax offset through each individual income tax return. For a partnership or trust this will result in a tax offset of up to $1000 for each partner or beneficiary.
Immediate deduction of assets up to $20,000
At present, small businesses can claim an immediate deduction for the purchase of assets valued at $1000 or less. This was increased to $20,000 for each asset purchased from budget night up until June 30, 2017.
To provide an example of the benefit to small business let’s assume a bakery purchases a new oven for $17,500 and a new display cabinet for $3500. If purchased prior to budget night the business would have had to depreciate this equipment as part of a general pool to gain accelerated depreciation. In the first year this would have provided a tax deduction of $3150. If purchased after 7.30pm on budget night the tax deduction would be $21,000.
Capital gains tax rollover relief when changing legal structures
The Federal Government will allow small businesses to change their legal structure without attracting a Capital Gains Tax (CGT) liability at that point.
Relief is currently available to individuals who move to a company structure, but all other changes (i.e. from partnership or trust to a company) have the potential to trigger a CGT liability. The government recognises the structure appropriate to a particular business will change as it becomes established and grows.
This measure is part of the government’s Jobs and Small Business Package and aims to reduce red tape that might otherwise hinder the growth of small business.
New measures are to be introduced to assist small business to provide work experience to younger job seekers. This will allow businesses to provide work experience to younger people without experience for up to four weeks while the trainee continues to receive their income support payment. If permanent employment is offered after this period a wage subsidy of up to $6500 may be accessed. This subsidy may be beneficial when looking for staff to serve customers.
The Restart wage subsidy is available to employers who hire people older than 50 years of age. In 12 months this subsidy can amount to $10,000. This subsidy may be most beneficial when seeking to employ a qualified and experienced baker.
It must be remembered these initiatives have not been passed by parliament as yet. Small business owners should, therefore, be cautious in acting on any or all of them.
While it is hard to imagine the opposition parties would block these measures, one must remember various aspects of the 2014 Budget are yet to be enacted. Similarly, you should speak to an accountant to seek the advice specific to your circumstances prior to acting on this information.