As anticipated, the 2019 Federal Budget delivered by Treasurer Josh Frydenberg on 2 April 2019 included a range of tax cuts for both individuals and for small businesses, both of which may be applicable to small business owners.
• Increase to the instant asset write-off on asset purchases for small business
• Expansion of the instant asset write-off to medium sized business with turnover up to $50 million (previously a $10 million cap)
• Lower tax rates for small business to be phased in over 3 years
• Personal income tax savings that will benefit some small business owners
For a perspective on these policy changes, read this article by Jamie Osborn “Did the Federal Budget go far enough for small business”?
Increase to the instant asset write-off threshold on asset purchases for small business
The Government has increased the instant asset write-off threshold from $25,000 to $30,000. The threshold applies on a per asset basis, so eligible businesses can instantly write-off multiple assets as long as the individual value of an asset is less than $30,000.
For assets that cannot be immediately deducted (for example, assets greater than $30,000 in value), they can be placed into the simplified depreciation pool and depreciated 15 per cent in the first income year and 30 per cent each income year thereafter.
Expansion of the instant asset write-off to medium sized business with turnover up to $50 million
The instant asset write-off has been expanded to apply to medium sized businesses with turnover up to $50 million (up from $10 million). Ineligible assets will be depreciated as per the tax depreciation schedules (there is no simplified depreciation pool for medium sized businesses).
All the changes to the instant asset write-off apply from budget night and will run until 30 June 2020.
Lower small business tax rates to be phased in over 3 years
The decrease in small business tax is being accelerated and phased in over the following three years.
Personal income tax savings that will benefit some small business owners.
There are a range of changes to personal income tax and personal income tax brackets that may benefit small business owners. These include:
1. An increase to the Low Income Tax Offset. This will benefit income earners that ear up to $66,667 or less in income.
2. Reduced marginal rates of income from July 1, 2024 (the 32.5 per cent marginal rate will reduce to 30 per cent).
3. From 2024/2025 the 37 per cent tax bracket will be removed, resulting in 94 per cent of Australian tax payers paying a marginal tax rate of 30 per cent or less.