Budget 2016 | Small Business
Reducing the company tax rate to 25%
From 1 July 2016, the company tax rate will be progressively reduced to 25 per cent over 10 years.
The tax rate for businesses with an annual aggregated turnover of less than $10 million will be 27.5 per cent from the 2016-17 income year. The annual aggregated turnover threshold will then be progressively increased to ultimately have all companies at 27.5 per cent in the 2023-24 income year.
In the 2024-25 income year the company tax rate will be reduced to 27 per cent and then be reduced progressively by 1 percentage point per year until it reaches 25 per cent in the 2026-27 income year. The reduction in the company tax rate for businesses with various levels of annual aggregated turnover is summarised in the table below.
Increasing the small business entity turnover threshold to $10 million
From 1 July 2016, the small business entity turnover threshold will be increased from $2 million to $10 million.
This will allow eligible incorporated businesses to gain access to small business concessions such as the lower small business company tax rate of 27.5 per cent from 1 July 2016, the ability to claim an immediate deduction for assets they start to use or install ready for use that costs less than $20,000, and access the depreciation pooling provisions implemented as part of last year’s budget measures.
The current $2.0 million turnover threshold will be retained for access to the small business capital gains tax concessions.
Increasing the unincorporated small business tax discount
Currently, individual taxpayers with business income from an unincorporated business that has an aggregated annual turnover of less than $2 million, are eligible for a small business tax discount of five per cent of the income tax payable. The discount is capped at $1,000 per individual per income year.
From 1 July 2016, the tax discount for unincorporated small businesses will be increased incrementally over 10 years to 16 per cent as summarised in the following table.
Additionally, access to the discount will be extended to individual taxpayers with business income from an unincorporated business that has an aggregated annual turnover of less than $5 million.
The current cap of $1,000 per individual for each income year will be retained.
