By now you’ll have heard the Federal Budget 2015 is good news for small businesses. So what does it all mean for manufacturers? Here, we look at making the most of the tax cuts.
Treasurer Joe Hockey had barely sat down after his 2015 budget speech when small businesses started rushing out to the stores, buying up new equipment and technology to take advantage of the vastly increased $20,000 instant tax claim limit.
So how good exactly is the budget for Australian small businesses? To put it into perspective, the 2015 budget is worth a whopping $5.5 billion worth of tax cuts and concessions to small businesses. And then there are the additional changes to trade and foreign investment to take into account.
Let’s break it down…
Tax cuts for small businesses
For businesses turning over less than $2 million a year, the budget includes a tax cut of 1.5% (from 30% to 28.5%). That could mean up to $30,000 savings a year. In addition, unincorporated small businesses, such as sole traders, partnerships and trusts, get a 5% tax discount.
What this means for manufacturers: This budget is all about investing in growth. The tax cuts give small businesses more profit to work with. This is money you can invest in things that will grow your manufacturing business — whether that’s hiring new staff, new product innovation, building a new website or upgrading your equipment.
$20,000 tax deduction
This is the part everyone’s talking about. The budget includes an immediate 100% write-off for assets up to $20,000. And when Hockey says “immediate”, he means from the moment he sat down! (That is, from 7:30pm Tuesday, 12th of May, 2015.)
How it works: Any trading small business or sole trader with an Australian Business Number (ABN) and an annual turnover of under $2 million is eligible. (You have to be able to demonstrate ongoing activity via quarterly Business Activity Statements (BAS), in other words, your business has to be actively trading to qualify.) The asset must be relevant to your business, although it doesn’t need to be brand new. If your business buys the items outright, you get 100% of the purchase price back as a tax write-off. The $20,000 limit applies to each individual item, and you can apply it to as many individual items as you like. You have until 30 June 2017 to take advantage of this concession, when the $1,000 threshold returns.
What this means for manufacturers: When it comes to improving productivity, driving better efficiency and ensuring a consistently high quality of products, equipment has a huge part to play. Previously, limited budgets have prevented many smaller manufacturers from taking in the step into an automated or semi-automated production line. Now, you have the green light to invest in equipment that will save costs and improve your bottom line. Start by doing some research into the right labelling, coding, marking and vision inspection equipment for your business — our experts are on hand to help out.
Changes to FBT
Red tape has been thinned (not “cut”, but “reduced”) in the Fringe Benefits Tax (FBT) system. Now, all small business work‑related portable electronic devices are FBT free.
And if a small businesses happen to change their legal structures, they will also benefit from a new Capital Gains Tax rollover relief.
What this means for manufacturers: If you’ve been putting off upgrading your portable electronic devices or investing in some, now is the time. You’ll enjoy some extra savings in your back pocket.
The Government will swing $18 million over to Austrade to expand on its Australia Week event program. China, India, ASEAN countries and the United States will host events, with the overall goal to build Australia’s reputation as a trade and investment partner, as well as a tourism destination. An additional $24.6m will be spent over two years to promote business understanding of the recent Free Trade Agreements (FTAs) in North Asia.
What this means for manufacturers: The foundations are being set for manufacturers to maximise the benefits of the FTAs. Watch this space…
The above is a snapshot of the relevant bits of the Federal Budget for manufacturers. There are many, many articles around the web on this topic, including FoodMag’s comprehensive overview. The bottom line is not to limit yourself to the direct savings you’ll make, but to consider how you will be able to use these savings to promote long-term growth and innovation.