Small business will be able to claim immediate tax deductions for individual items up to $20,000 until 2017, creating a short-term bonanza for businesses with a turnover of less than $2m.
The deduction measure will end in June 2017. After that, tax arrangements will revert to the existing system.
The measure forms part of a wide-ranging small business package with a total value of $5bn, the centrepiece of the Coalition’s second budget.
The treasurer said future economic growth would come from “growing small business into big business”.
“We recognise that small business, in order to succeed, needs better cash flow and better tools for innovation,” Joe Hockey told parliament.
“So I announce that from 7.30pm tonight, small business can claim an immediate tax deduction for each and every item they purchase up to $20,000.
“From tonight it can be instantly written off to reduce your tax liability.”
Assets worth $20,000 or more, which cannot be immediately deducted, can be pooled and depreciated at 15% in the first income year and then 30% per year after that.
The total depreciation measure – including the $20,000 deduction measure – costs $1.8bn over the next four years.
In other new measures, unincorporated businesses will receive a 5% tax discount of up to $1,000 a year.
For small businesses under $2m turnover, the budget confirmed:
· the small business (incorporated) tax cut of 1.5%,
· tax deductions for costs incurred starting up businesses,
· capital gains tax rollover relief for restructuring existing business.
The budget also provides a fringe benefits tax exemption from 1 April 2016 for portable electronic devices used for work, such as mobile phones, laptops and tablets – where employers provide more than one device.
The budget changes the rules around employee share schemes, so that employees do not have to pay tax on their shares until they receive a financial benefit from the shares.
According to the budget, 96% of Australian businesses have a turnover of less than $2m a year, provide 4.5m jobs and produced $330bn in economic output.
“If you run a cafe, it might be new kitchen equipment, or new tables and chairs,” Hockey told the parliament. “If you’re a tradie, it might be new tools or a computer for the home office.”
