Tax changes were a big focus for the Australian Government over the last few years. With the Australian federal election set to take place on Saturday 18 May 2019, however, Australia’s major political parties and independent candidates are well into their election campaigns and focused on a range of policies.

While the next Government may implement new policies that impact SMEs, it’s not too late to identify how your business can save money and invest for growth even if the Government is in caretaker mode. This is why now is an opportune time review recent tax changes in Australia and how your SME can benefit. In this article, we’re taking a look at recent tax changes and how they can benefit Australian SMEs.

Changes to company tax rates

In 2016, the Australian Government introduced the Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016. The Bill proposed cuts to the corporate tax rate for businesses that have $25 million or less in turnover for the 2017-18 financial year. Following the Royal Assent of this Bill on 19 May 2017, the Government introduced the Treasury Laws Amendment (Enterprise Tax Plan No. 2) Bill 2017. Under this Bill, it was proposed that the corporate tax rate is progressively lowered from 30% to 25% by 2022.

To benefit from the Government’s reduced corporate tax rates, SMEs need to meet the criteria to be determined as a base rate entity. For the 2017-18 financial year, base rate entities are businesses with an aggregated turnover threshold under $50 million. For these companies the tax rate will decrease progressively from 30% to the following rates:

  • 2018-19 and 2019-20 financial year: 27.5%
  • 2020-21 financial year: 26%
  • 2021-22 financial year: 25%

Small Business Income tax offset

Small businesses also have access to the small business income tax offset. This offset is for small businesses with a turnover of less than $5 million. Small businesses can claim up to $1,000 per year, per person under the small business income tax offset. Offsets like the small business income tax offset can be one of the helping hands you need to reach your full potential as a business owner.

Instant-asset write-off

When the Government handed down its budget on 2 April, Treasurer Josh Frydenberg announced that the threshold for the instant asset write-off would increase from $25,000 to $30,000. Businesses with $50 million or less in annual revenue are eligible. This means asset purchases up to $30,000 can be written off in the financial year the asset was purchased. The cut-off date for claiming the instant asset write-off is 30 June 2020.

For SMEs looking to reinvest money back into their businesses, these tax cuts and offsets present an excellent opportunity to think about how you can take advantage of the cash these changes could unlock.

To free up more cash for your business, make sure to review your revenue and expenses in your accounting software. From there, you can speak to your accountant or calculate yourself to forecast what you have owing for business activity statements (BAS) or your annual tax bill. This will help you to identify your savings and, if you have additional cash, you could invest it back into your business.

Speak with a lending specialist today about funding the growth of your business.


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