The Small Business Entity threshold has increased to $10 million from 1 July 2016 onwards (became law on 19th May 2017). Previously the Small Business Entity threshold was $2 million. Basically, you are a Small Business Entity if you carry on a business and have an aggregated turnover of less than $10 million.
This increase opens up a few very attractive tax deductions and concessions to a lot more Small Business Entities than ever before.
Firstly, it means more small businesses can use the less than $20,000 instant asset write off measure, which was also recently extended (in the 9th May 2017 budget) to 30 June 2018.
Just remember that:
- The cost of the asset must be less than $20,000 after GST. But if you are not registered for GST the cost must be less than $20,000 including GST.
- The asset can be new or second hand.
The increase to the Small Business Entity threshold also means more small businesses will be able to benefit from prepaying expenses prior to the end of the financial year. Small Business Entities can claim a deduction for an expense at the time the payment is made even if the payment relates to a future period.
Again, a couple of things to remember:
- The period that the payment relates to must be for a period of 12 months or less – like an insurance policy or something else with a defined time frame.
- The period must also end before the end of the next income year (pay in June 2017 for something relating to the period 1 July 2017 to 30 June 2017 – fine, no apportionment required).
A Small Business Entity also has the ability to account for GST on a cash basis meaning you only report something in your BAS when your customers have paid you or you have paid your suppliers – this simplifies the preparation of a business’s BAS and bookkeeping.
Possibly, one of the most exciting areas that will be opened up to more Small Businesses due to the increase in turnover threshold is the Small business restructure roll-over concessions allowing Small Business Entities and possibly those connected with it to restructure their business for a genuine business purpose without creating any or very little immediate tax implications. For more information you can read my article “Small business restructure roll-over concessions”
Remember that the increase to the Small Business Entity threshold does not apply to the Small Business Capital Gains Tax Exemptions.
If you think that any of the concessions discussed above may assist your business please contact us here at Paris Financial.
Ken Burk, Partner, Paris Financial
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