Small business and the Federal Budget, what you need to know. 

Today, we welcome friend of Deane & Co, Cara Brett of Bounce Financial to the blog to talk us through what the recently released federal budget means for small business. While it's not necessarily something that sets many of our hearts on fire, as business owners it's important to know what's happening on a national and global scale. Since Cara's an expert on all things money, we asked her to go through the budget announcements with a fine tooth comb, and share what small business owners need to know. Read on!

"For a lot of people, the Federal budget night is not too exciting. As a small business owner however, it's something that we need to look at (whether we like it or not) because typically some of the changes on the night will have a direct impact on our businesses, sometimes the very next day. 

It’s important to know what affects you and when, so that you can continue to run your business in the most effective way, within the everchanging rules around tax. So, the question is, what changed in the 2018 budget for small business?

Extension of the $20,000 automatic tax deduction on assets: This is a benefit that we have had for a couple of years now that was expected to stop June 30, but it has been extended for another year. This allows a business to purchase an asset for up to the value of $20,000 and receive the full tax deduction straight away. Previously, you would need to depreciate the asset over a number of years, but this allows you to effectively deduct the whole amount from your taxable income. Strategically, this can be helpful, especially in businesses whose income is up and down in different years. The asset can be just about anything as long as it relates to your business operations including assets like furniture, machinery, computers or anything that specifically relates to your trade. 

The BAS process got a little easier: For most businesses, the financials are the ‘bane of their existence’ and navigating the tax system can be a bit of a pain in the you know what. There has been a small change in the BAS process reducing the questions from 20 to 3. Big deal? Not really but anything that reduces your time doing the books and gives you more time to do what you do best, is a good thing, so we’ll take it. 

The company tax rate reduction for small to medium businesses will continue as currently legislated. This means the company tax rate will reduce to 27.5% for companies with turnover less than $25 million for the 2017/18 year. This will expand to companies with a turnover of less than $50 million from 1 July 2018.

The black economy crack down: This started following last year’s budget and this year the government are throwing more money at cracking down on the cash economy to reduce money laundering and tax evasion. Part of this is to enforce a cash payment limit of $10,000. I dare say this won’t affect many people as it is not often someone wants to pay a $10,000 invoice with cash, but it is important to note that the ATO is going to be taking a closer look at cash heavy businesses. They will want to make sure that the financials reflect the actual turnover in the business.

So, what hasn’t changed?

Mandatory super contributions stay the same: There has been a plan to slowly increase the mandatory employer super contributions over the next few years to 12% by the year 2025. We saw an increase a couple of years ago to 9.5%. This year, it’s stayed the same. That means that you will continue to pay employee 9.5% super contribution, so no changes.

Minimum staff wages stayed the same: No changes on this front at the moment, instead small tax cuts have been passed onto workers, which is a win/win for businesses and employees alike. 

My thoughts? Whilst it doesn’t seem like there are many benefits in it for small businesses, and you would be right, there also haven’t really been too many disadvantages. This means that you can continue business as usual, which for a small business, is a pretty great thing. 

That also means it’s a good time to continue to grow and invest in your business, whether that be expansion, marketing and promotion or development. If you are starting to think about your business plan for 2018/19 year, you will now have a little more certainty over what to expect for the 12 months to come."

Cara Brett proudly heads up Bounce Financial. A self-proclaimed numbers geek, Cara founded Bounce in 2014 after a successful, decade-long career in the financial services industry. When it comes to all things financial, she practices what she preaches, so you know the methods and recommendations and tried and tested.

Claire Deane