There are a number of legislative changes that impact both small and medium sized businesses in 2015/16. The company tax rate cut comes into effect but there’s a range of other changes you need to be aware of including:
Company Tax Rate Cut
From 1st July 2015 the company tax has been cut from 30% to 28.5% for incorporated small businesses with turnover of less than $2 million. The company tax cut is limited to those businesses with turnover of less than $2 million which is aggregated, so if you have multiple businesses you have to look at the ‘aggregation’ provisions.
5% Tax Discount for Unincorporated Small Businesses
From July 1, 2015 small businesses that are not incorporated receive a 5% tax discount capped at $1000 per annum. A sole trader with an annual turnover of $300,000 and a taxable income of $75,000 would pay tax of around $16,000 under the previous system. With the 5% tax discount the sole trader will pay $15,200 in tax, a saving of $800.
Increase to the Minimum Wage
As of 1st July 2015 the minimum wage increased by 2.5%, the equivalent of $16 per week. It’s important for small business owners to review the awards they have in place as they may be impacted by the 2.5% increase. If you are paying staff in excess of these base rates then no action is required. The Fairwork Ombudsman website has Pay Tools to help you check your current pay rates at:-
SuperStream Begins for Small Employers
The SuperStream system started on 1st July 2015 for small employers with 19 or fewer employees. SuperStream is a compulsory change for all employers across the country, with small businesses now required to make super contributions electronically in a specific format. There is a
12 month period of grace, but don’t leave implementation to the last minute. Employers can update payroll software or work with an accountant or BAS agent, a clearing house or with the super fund directly. You need to look at the option that best suits your business.
Changes to Claiming Start-Up Costs
Under previous rules, a start-up businesses could only claim their administration costs over five years. As from 1st July, 2015 if you set up and are profitable in your first year you can claim those establishment costs as a tax deduction in the first year.
Employee Share Schemes
New laws governing employee share schemes came into effect on 1st July, 2015. The tax on options is now paid when the option is converted to a share. The government has also introduced a new incentive that will allow further deferral of the taxing point where eligible start-up companies issue shares or options to their employees at a small discount. The purpose is to tax employees on the benefits when they are able to cash them out.
Changes to Claiming Car Expenses
The methods of calculating work-related car expense deductions have changed from the 1st July 2015. The ‘12 per cent of original value method’ and the ‘one-third of actual expenses method’ have been removed. The ‘cents per kilometre method’ has also changed by replacing the three (cents per kilometre) rates based on engine size, with one rate set at 66 cents per kilometre in respect of all cars. The Tax Commissioner will be responsible for updating the rate in subsequent years.