The Federal Government’s proposed changes to the tax system will reap major changes for small business operators.
Company tax will be cut to 28 per cent and small businesses can write off assets worth up to $5000. All other assets, aside from buildings, can now be written off at a depreciation rate of 30 per cent.
The definition of small business will remain at companies with an annual turnover of $2 million or less.
The 2 per cent cut in company tax will be introduced in 2014, but small businesses will get it early. The change will apply for the 2012/2013 financial year.
The instant asset write off point of $5000 is up from the previous threshold of $1000. This means all goods purchased for business, such as computers, servers or printers, can be deducted from the next tax submission without the hassle of working out depreciation rates.
For anything more expensive than $5000, assets can be placed in a single pool with a dynamic depreciation rate of 30 per cent per year. For example, a car for business worth $30,000 can have $9000 written off in the first year, $6300 in the second year, $4410 in the third year and so on.
The old system forced small businesses to place the assets into one of two depreciation pools. This does not include buildings.
The measure will take effect from July 1, 2012.