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Budget Proposal Watered DownWhile not yet passed, the Government has reached agreement with minor parties to be able to partly pass its Company Tax Reform legislation.

The 2016/17 budget proposal was to deliver tax cuts eventually to all companies down to a company tax rate of 25% (from current 30%).

The ‘agreed’ tax relief has been watered down and will only apply to companies with a turnover of less than $50 Million.

For the current financial year ending on 30 June 2017, the definition of ‘Small Business’ has changed from a business with a turnover of less than $2 Million to a business with a turnover of less than $10 Million.

This means all companies with a turnover of less than $10 Million will pay tax at 27.5%.

It is our understanding that the 27.5% tax rate will extend and apply to companies with $25 Million (or less) turnover in the 2018 year and $50 Million (or less) turnover in the 2019 financial year.

For all companies with turnover below these thresholds, the tax rates will reduce in accordance with the table below:

Future tax rates for companies with <$50mil turnover

Financial year Tax rate to apply
2024/25 27%
2025/26 26%
2026/27 25%

All remaining companies will retain their current tax rate of 30%.

When this law passes, with the definition of Small Business expanding from 1 July 2016, all businesses with turnover of less than $10 Million should be able to take advantage of the immediate write-off of assets costing less than $20,000.

From 1 July 2017, this small business write-off is scheduled to revert back to assets costing less than $1,000, so small businesses considering acquiring new assets may wish to consider bringing forward any purchase.

The Parliament next sits in May to confirm the passing of this legislation.

Should you have any queries in relation to how these changes affect your company, please speak with your usual Hanrick Curran adviser or contact Tax Partner Jamie Towers on 07 3218 3900.

 

Please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice.