- Company tax drops 2% from 30% to 28%. For ‘small business’ the reduction kicks in from 2012/13. For ‘large companies’ it is phased in at 29% for 2013/14 and 28% for 2014/15.
ACTION: Claim all your deductions you can this year. Deductions are worth less with a lower tax rate. Trusts and partnerships miss out. Should you convert your business to a company? You then miss the CGT concession. Therefore, assets are better off in non-company entities. Pay out dividends before the pool of imputation credits is reduced from 30% to 28%.
- Currently small business can only expense assets under $1,000. Soon it will be <$5k you can immediately write-off (Ken Henry recommended $10k). Further, all other assets (except buildings) are written off in a single depreciation pool at a massive rate of 30% (this applies from 1 July 2012).
ACTION: Again, write off everything you can while the company tax rate is still a high 30%. This improves cash flow.
- Superannuation Guarantee rate increased from 9% to 12%. The employer has to pay this to the employee’s superannuation fund. The increase is phased in from 1 July 2014 to 1 July 2020.
ACTION: This increases the cost of labour so look at doing your Employment Contracts so that employees wear the increase, not the employer.
- Superannuation Guarantee age limit increased to 75: The age limit is raised from 70 to 75. This starts on 1 July 2013.
ACTION: Look at “transferring” the business out of the old person’s name for no tax. Great business succession planning. Clients also need to work with financial planners about this new opportunity – another half decade of life to put money into this tax haven we call superannuation.
- You can only put $25k a year into super, pre-tax – concessional contribution. (You can put in $150k per year post tax – non-concessional). This is to stop the rich moving all their assets (other than their family home) into the tax haven. For people over 50 years of age, you were allowed to put in $50k of concessional contribution – but that stops shortly. Now, for those aged over 50, the $50k super cap continues beyond 30 June 2012 – but only if you have a miserable $500,000 in your super fund.
Ref: Law Central E-Newsletter 10/05/10