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20th Jun, 2018

Lower company tax rates and imputation

Company tax rates are falling in Australia. Companies carrying on a business with turnover of less than $25 million will pay a rate of 27.5% in 2018 – the rate of 30% only applies if turnover is $25 million or more,
or the company is not carrying on a business.

By 2027, the tax rate will reach a low of 25% for companies carrying on a business with turnover up to $50 million.

TIP: The dividend franking rate for 2018 may be different from a company’s tax rate, depending on whether turnover in 2017 was less than the current year’s turnover benchmark ($25 million for 2018).

Deductions for small business entities

Small business entities (companies, trusts, partnerships or sole traders with total turnover of less than $10 million) will qualify for a raft of tax concessions in the 2018 income tax year:

  • the $20,000 instant asset write-off – an immediate deduction when buying and installing depreciating assets that cost less than $20,000.
  • the simplified depreciation rules – accelerated depreciation rates of 15% or 30% for depreciable assets that cost $20,000 or more;
  • the small business restructure rollover;
  • an immediate deduction for start-up costs;
  • an immediate deduction for certain prepaid expenses;
  • the simplified trading stock rules – removing the need to do an end-of-year stocktake if stock value has changed by less than $5,000;
  • the simplified PAYG rules – the ATO will calculate PAYG instalments;
  • cash basis accounting for GST – the ATO will calculate the GST instalment payable and annual apportionment for
  • input tax credits for acquisitions that are partly creditable;

  • the FBT car parking exemption (from 1 April 2017); and
  • the ability for employees to salary-sacrifice two identical portable electronic devices (from 1 April 2016).
  • These concessions are very powerful for small businesses, and can lead to substantial tax savings.

    Small business CGT concessions

    If you’re selling a business that has an aggregated turnover of less than $2 million (a “CGT small business entity”) or the value of its net CGT assets is $6 million or less (it satisfies the $6 million “net asset value” test), you may be able to access the small business CGT concessions.

    These concessions include:

    • a 15-year exemption – no CGT is payable;
    • a 50% active asset reduction – a 50% CGT discount in addition to the 50% general discount;
    • the retirement exemption – up to $500,000 lifetime tax-free limit; and
    • the active asset rollover – minimum two years’ deferral.

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