Small Business
Increase in Investment Allowance for Small Business
Small business entities will be able to claim an increased investment allowance of 50% (instead of the previously announced 30%) of the cost of eligible assets acquired between 13 December 2008 and 31 December 2009, and installed by 31 December 2010.
All other businesses will continue to access the investment allowance at 30% for eligible assets contracted for between 13 December 2008 and 30 June 2009, and 10% for eligible assets committed to investing in between 1 July 2009 and 31 December 2009, and installed by 31 December 2010.
Small business entities need to invest a minimum of $1,000 on an individual asset in order to qualify for the 50% investment allowance.
Aggregation of Identical Assets
The Government reiterated that taxpayers will also be allowed to aggregate the eligible expenditure on identical or substantially identical assets to meet the requisite investment threshold. The eligible expenditure on assets may also be aggregated if they form part of a set. Items may be regarded as a set if they are dependent on each other, marketed as a set, or designed and intended to be used together.
Pay As You Go (PAYG) Instalments — Cash Flow Relief for Small Business
The Government will provide cash flow relief for small business by reducing Pay As You Go (PAYG) instalments for the 2009/10 income year for all taxpayers who pay quarterly PAYG instalments based on their previous year's tax adjusted by GDP growth.
For the 2009/10 income year, the Government will reduce the GDP adjustment factor for calculating quarterly instalments under the GDP adjustment method from around 9% to 2%. This aligns the GDP adjustment rate with the expected consumer price index (CPI) for 2009/10 as forecasted.
This measure was previously announced in a joint press release issued on 28 March 2009 by the Treasurer and the Minister for Small Business, Independent Contractors and the Service Economy.
Capital Gains Tax – Further Amendments to Small Business Concessions
The Government will make several changes to the small business capital gains tax (CGT) provisions so that they operate flexibly.
A transitional rule will extend the time for taxpayers to choose to access the concessions where the choice arises from changes to the concessions announced in the 2008/09 Budget and the 2008/09 Mid-Year Economic and Fiscal Outlook. This extension of time will apply from Royal Assent of the amending legislation.
Access to the concessions for assets acquired on the death of an individual will be extended to cover assets that have passed to a testamentary trust where the individual would have been able to access the concessions at the time of their death. This extension will apply to CGT events happening in the 2006/07 income year and later income years.
The provisions which treat certain distributions to entities connected with a private company as dividends will be excluded from applying to the small business CGT retirement exemption. This exclusion will apply from Royal Assent of the amending legislation.
This measure was introduced into Parliament together with the previously announced changes to the concessions on 19 March 2009.
Entrepreneurs' Tax Offset – Income Testing Deferred
The family income test for the entrepreneurs' tax offset which was announced in the 2008/09 Federal Budget will be deferred for a further 12 months. This means the family income test will commence on 1 July 2009 instead of 1 July 2008.
The entrepreneurs' tax offset provides a maximum 25% tax offset against the tax liability for small business entities with annual turnover below $75,000. Under the proposed family income test, the entrepreneurs' tax offset would begin to be phased out for singles with income of $70,000 and families with income of $120,000. The deferral of the income test will mean eligible small business will not have their entrepreneur's tax offset reduced in the 2008/09 year.
