May 18, 2015

Post-Budget Analysis for Startups

“A good life is in reach for everyone who is willing to work and to do the right thing” - David Cameron

It appears our treasurer, Joe Hockey, has taken a leaf out of the British Prime Minister’s playbook, with increased support for start-ups and small businesses the crowning jewel of the conservative government’s proposed Federal Budget for 2015/16. If you’re thinking about ‘having a go’, the time is now!

Please Explain? Oh I will…

Tax Cuts

  • If your small business has an annual turnover of less than $2 million per annum you can expect to have your tax burden reduced by 1.5%. Your tax rate shall be decreased from 30% to 28.5%. Effective from 1 July 2015.

  • Unincorporated operations such as sole-traders, partnerships and trusts shall enjoy a 5% tax discount on their business’ taxable income. Effective from 1 July 2015.

Tax Deductions

  • In the market for new business equipment? The government has implemented an immediate tax deduction on the acquisition of all business assets valued under $20 000. Previously this instant asset write off only applied to assets of up to $1000, so this is a great win! The best part is that it is available NOW, making it easier for you to get your business started today.

  • An added bonus for start-ups – all administrative fees incurred in setting up a business, including registration and legal expenses shall be tax deductible straight away (not over the course of 1-5 years).

  • The Fringe Benefits Tax exemption will soon extend to all work-related portable devices, such as laptops and tablets, not just one, as is currently the case.

Incentives

  • As a great encouragement to entrepreneurs and burgeoning start-ups, it will soon be easier to attract new talent to your enterprise by providing shares or options as opposed to cash incentives. In the past, share and option distribution was subject to income tax from the get-go, even though financial gain was yet to be realised. From 1 July 2015 there will be no upfront income tax payable on these shares or options. That’s right, you will not be taxed on income until you’re reaping the benefits.

  • Should you decide to offer discounted shares to employees, the (small) discount itself will be exempt from tax.

  • Funding. The bane of a start-up’s existence. Enter crowd-sourced equity funding! At present in order to gather this style of funding a proprietary company is required to transition to a public company structure. This may still be necessary but the government has promised to slash the costs involved in the transition from private-public to support startups in their quest for crowd-sourced equity funding.

The Caveat

  • Don’t jump the gun! Some of these changes were in force from the moment they left Hockey’s lips, but most of them weren’t. The proposed Federal Budget is mostly just that, proposed. The Senate must still give their seal of approval, meaning that we’ll be waiting until 1 July to see these changes start to take shape.
This information is of a general nature only and does not constitute professional advice. You must seek professional advice in relation to your particular circumstances before acting.

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