Effective from 1 July 2016 the tax concession rules for small businesses have changed. Following are some of the key changes that will apply from the 2017 tax return.:
- Company tax rate cut: The company tax rate for small businesses has decreased from 30% to 27.5%. Companies with turnover less than $10 million are eligible for this rate.
- Increase in small business income tax offset: The offset has increased from 5% to 8%, capped at $1,000 per year. Only businesses with a turnover of less than $5 million are eligible and the offset applies only to business income for sole traders, or share of business income for partnerships or trusts.
- Increase in small business turnover threshold: The threshold has increased from $2 million to $10 million. This means more businesses can access a range of small business concessions, including the $20,000 instant asset write-off for the 2016-17 income year.
- If you are a business with 19 or fewer employees, or have an annual aggregated turnover of $2 million or less, you can make your super guarantee (SG) contributions as a single electronic payment to the Clearing House and it will distribute the payments to employees’ funds. Here’s the link: Small Business Superannuation Clearing House
- Superannuation Rate: The minimum super you must pay each quarter for each eligible employee is called the super guarantee (SG). Currently the SG is 9.5% of their ordinary time earnings (OTE).
- Quarterly Super Due Dates
|Quarter||Period||Payment due date|
|1||1 July – 30 September||28 October|
|2||1 October – 31 December||28 January|
|3||1 January – 31 March||28 April|
|4||1 April – 30 June||28 July|
- While the SG contribution for the June quarter is not due till the 28th July, in order to get the income tax deduction in a given financial year the payment should be made before 30 June.
- Concessional before-tax super contributions: You may voluntarily contribute additional amounts to your super subject to the following concessional caps. Concessional contributions are taxed at the 15% rate.
|Financial year||Age||Concessional cap|
|2016-17||Less than 49 on 30-Jun-16||$30,000|
|2016-17||49 or older on 30-Jun-16||$35,000|
- Registration Deadline: The deadline for lodging an application for registration is 10 months after the end of a company’s income year. This means a company with income period of 1 July 2017 to 30 June 2018 must lodge its registration application with AusIndustry by 30 April 2019
- The tax benefit that companies will receive from the R&D tax offset for the 2016-17 tax year is outlined in the table below
|R&D Tax |
|Less than $10 m||27.5%||43.5%||16%||Refundable|
|Between $10m - $20m||30%||43.5%||13.5%||Refundable|
|$20m or more||30%||38.5%||8.5%||Non-refundable|
- Budget 2018- R&D Scheme Changes Proposed From 1 July 2018
Companies with aggregated annual turnover of $20 million or more
There will be an R&D premium that ties the rates of the non-refundable R&D tax offset to the incremental intensity of R&D expenditure as a proportion of total expenditure for the year.“Intensity” is the percentage measure of R&D expenditure as a proportion of an entity’s total expenditure. The marginal R&D premium will be the claimant’s company tax rate plus:
R&D Intensity R&D Premium R&D expenditure between 0% to 2% 4% R&D expenditure above 2% to 5% 6.5% R&D expenditure above 5% to 10% 9% R&D expenditure above 10% 12.5%
The R&D expenditure threshold – the maximum amount of R&D expenditure eligible for concessional R&D tax offsets, will be increased from $100 million to $150 million per annum.
Companies with aggregated annual turnover below $20 million
The refundable R&D offset will be a premium of 13.5% above a claimant’s company tax rate. Cash refunds from the refundable R&D tax offset will be capped at $4 million per annum.
R&D tax offsets that cannot be refunded will be carried forward as non-refundable tax offsets to future income years.
Refundable R&D tax offsets from R&D expenditure on clinical trials will not count towards the cap.
Eligible investors in Early Stage Innovation Companies (“ESIC”) are eligible for:
- A 20% non-refundable carry-forward tax offset, up to $200,000 per investor, per year; and
- A capital gains tax exemption for shares which are held for more than 12 months but less than 10 years. For shares held for more than 10 years, the cost base of those shares will be their market value as determined on the 10 year anniversary date. Capital losses (whether the shares are held for more or less than 12 months) must be disregarded.
A company will qualify as an Early Stage Innovation Company (“ESIC”) if it meets both:
- the early stage test; and
- either the 100-point innovation test or principles-based innovation test.
To satisfy the early stage test, a company must pass four tests:
- Incorporated in Australia within the last 3 years, or if not, within the last 6 years provided that expenses do not exceed $1 million in total across the last 3 years;
- Expenses < $1 million in the previous income year;
- Assessable income < $200,000 in the previous income year; and
- Not listed on any stock exchange.
This tool will help you calculate the amount of tax to be withheld from your employee’s gross salary
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