The Federal Government announced the 2015-2016 Budget in May. While the majority of its changes will not impact your tax return until next financial year, there are a few cost savings that you can capitalize on before the 30th of June.
The 2015-2016 Federal Budget appears geared towards improving and stimulating Australia’s economy, ensuring that more Australians have more work, and providing generous stimulus packages, particularly for small business owners and operators.
How the Federal Budget Impacts Small Business Owners
Small business owners and operators (defined as those businesses that have an annual turnover of less than $2 million) are definitely the big winners in the recent Federal Budget. The Australian government has effectively slashed financial red tape and offered generous tax concessions to all small business owners in the area of asset depreciation.
Effective from 12 May 2015 until 30 June 2017, small business owners will receive a tax deduction for every asset purchased that costs less than $20,000. The surprise was the incentive to purchases made next year was made effective immediately so it allows businesses to capitalize on the opportunity before June 2015 and claim the expense in the 2015 tax return.
This is not an accumulated total of $20,000. Rather, this applies to each individual business asset purchased under the value of $20,000 including new and second hand equipment. This means that now is the time for small business owners to update their equipment, purchase new office furniture, new computer equipment, upgrade software, new tools and in some cases even motor vehicles.
Any assets valued over $20,000 will be pooled together and then depreciated at the previous allowable depreciation rates.
All this means that if you’re starting, planning on starting, or currently operating a small business, then consider making asset investments before 30 June vs waiting until after the end of the financial year.
The Temporary Budget Repair Levy
The other major, non-moving condition confirmed by the Federal Government in the 2015-2015 Budget is that high-income earners will incur an additional budget repair levy as part of their 2015 income tax assessment. (up to 2%)
The Levy will apply to the 2015 income tax return assessments and will remain in place until 30 June 2017. It will apply to individuals whose taxable income exceeds $180,000. The government has estimated that approximately 400,000 taxpayers with taxable income above $180,000 will be liable to pay the levy in the 2014-2015 financial year.
How it will apply:
• Individuals with taxable income of $180,000 or below WILL NOT be required to pay the levy
• Individuals with taxable income in excess of the $180,000 limit will be required to begin paying the levy on the income above the threshold.
For example – Individuals with taxable income of $300,000 will pay two per cent of $120,000 (Levy amount $2,400)
Be sure to tune in next week when we take a detailed look at the rest of the 2015-2016 Federal Budget, and how it is likely to affect your tax return in the year ahead.