One of the major benefits announced by Federal Treasurer Joe Hockey is the ability to immediately write off professional expenses incurred in starting a business. So if you seek advice from an accountant or a lawyer, for example, about setting up a new company you will be able to immediately claim these fees as tax deductions. This change will apply from the 2015-2016 income year. Although not yet in effect, once in force it’s a great way to ensure start-ups are seeking the right help from their inception.
Another significant bonus for new enterprises are re-jigged tax laws that mean unincorporated businesses that have an aggregated annual turnover of less than $2 million– which make up the lion’s share of commercial structures in Australia and especially new businesses – can benefit from a 5 per cent tax deduction on their income tax payable, up to $1000 for each income year.
Here’s how it works. Let’s say your new business earns $300,000 in the current financial year, of which $75,000 is taxable. Under the previous system, $16,000 in tax would be payable. But under the new system the business would only pay $15,200 in tax, a benefit of $800. This change is for the 2015-2016 income year however, legislation for this measure has not yet been drafted.
One of the major announcements was a fringe benefits tax (FBT) exemption from 1 April 2016. For small businesses (with an aggregated annual turnover of less than $2 million) that provide employees with more than one qualifying work-related portable electronic device, an exemption applies even where the devices perform significantly similar functions.
Currently, an FBT exemption can apply to more than one portable electronic device used primarily for work purposes, but only where the devices perform significantly different functions. This makes it much more attractive for businesses to purchase items such as smart phones and tablets, that are integral to getting operational. The measure has been designed to encourage businesses to invest in digital technologies to make their operations more efficient. Although not in force yet, the legislation is currently being developed for this measure.
Special start-up measures
There have also been a number of other incentives just for new businesses. For instance, the government is taking steps to make it easy for emerging businesses to access crowd funding. As long as these measures go ahead, it will widen the pool of funding sources for start-ups so they are not so reliant on traditional funding channels, providing a much needed new source of funds for early stage ventures.
Moreover, the federal government is going to enable favourable tax rules for employee share schemes, meaning that start-ups will be able to offer staff equity in their remuneration packages without triggering adverse tax consequences. This will make it easier for new businesses to operate on a level playing field with larger businesses when it comes to putting together remuneration and incentive packages for staff, allowing them to land better and brighter talent.
In addition, the federal government is introducing a simplified online registration system for setting up a new business, including registering a company. This will help slash red tape for start-ups and will mean they can focus less on administration tasks and more on revenue-generating activities.
It’s an exciting time to be building a new business.