Ka-ching! Cash in on small business tax cuts

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With proposed cuts to the company tax rate officially in play, there’s no better time than now for small business owners to capitalise on the latest reforms. Small businesses are only required to pay 27.5% tax (down from 30%) on their earnings. Better yet, this applies retrospectively from 1 July 2016 creating a golden opportunity to claim back some cash.

To qualify for the current 27.5% tax rate, companies, corporate unit trusts and public trading trusts must report an annual turnover of less than $10 million. For the 2016-17 reporting period, the onus is on SMEs (or their tax advisers) to know whether they are eligible for a tax cut. The Australian Tax Office (ATO) says on its website that where a company has lodged their 2016–17 tax return using the 30% tax rate, and believes they are entitled to the 27.5% tax rate, “they should seek an amendment as we are unable to accurately identify these taxpayers”.

These measures will invariably require greater tax planning and record checking. Thomson Reuters’ Checkpoint has all the latest tax updates, answers and resources to keep you on your A-game. Take advantage of their free trial today.

there’s no better time than now for small business owners to capitalise on the latest reforms

The company tax rate is anticipated to sink even lower with the original Budget proposal involving a gradual reduction in the company tax rate to just 25% by 2026-27. The good news doesn’t stop there either – the government will apply the tax cut to progressively larger companies, which is hugely beneficial for growing businesses. From 2017–18, businesses with annual turnover of up to $25 million will qualify for the cut and from 2018–19, businesses with turnover up to $50 million will have an extra reason to smile as they too enjoy the relaxed rate.

 

The widening of thresholds not only gives more companies access to direct tax cuts, they will also benefit from a list of other perks that come with being a ‘small’ business, including:

  1. Simplified depreciation rules such as the instant asset write-off threshold of $20,000, which has been extended until 30 June 2018.
  2. Simplified trading stock rules.
  3. Option to account for GST on a cash basis and pay GST by instalments as calculated by the ATO.
  4. Simplified method of paying PAYG instalments worked out by the ATO.
  5. Various other tax concessions such as FBT car-parking and work-related device exemptions for small business employers.
  6. Simplified GST reporting is also now available so that from 1 July 2017, a small business with a GST turnover of less than $10 million can use the Simpler BAS reporting method.

As a small business owner, stop and ask yourself:

  • Am I making the most of the small business incentives available to me?
  • Could I benefit from a more tax effective strategy?
  • Is it time to recalibrate and restructure?
  • I lodged my 2016-17 return and was taxed at 30%, am I eligible for a credit?

These are some of the considerations you should be thinking about when reflecting on your business. With change comes opportunity and this is your chance to profit from the latest updates and reassess your situation. Checkpoint provides you with comprehensive and practical information to help you understand various tax and finance conditions. Checkpoint makes the hard work easy – try it today for free.

 

Jake Smith
Jake Smith is a writer and entrepreneur. A finance writer for Kochie's Business Builders, he is also the founder of Smithers, an Australian swimwear label designed with the modern day gentleman in mind. Equally passionate about writing and business, Jake started his career as a financial advisor with Bell Partners and Beyond Wealth and has covered five Olympic and Paralympic games as a sports journalist.

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