So, the 2015 Budget has been delivered. What is the big-picture outcome impacting the business environment?
It is clear that the Government wants to encourage business activity through companies by reducing the company tax rate from 30% to 28.5%.
A: To encourage companies to retain most of their profit for re-investment in business, thereby kick-starting our soft economy. Any excessive profit-taking by individuals from the business will be punished with comparatively higher tax rates.
A: The introduction of the 2% Budget Repair Levy and a 2% Medicare Levy means individuals now expect to pay up to 49% for those in the highest tax bracket. Businesses operating as sole-traders will be disadvantaged, as will businesses operating through Trusts, unless they receive the right tax advice.
There are still potential pitfalls to avoid, even as a corporate taxpayer. Fringe Benefits Tax just got more expensive, because it is linked with the 49% individual tax rate. Whilst companies may receive a favourable tax rate, the fact remains that mixing business with significant assets should be avoided due to the risk of outside litigation – so who should own the factory, or investment portfolio? Not to mention accessing the Small Business Capital Gains Tax concessions when you come to sell those significant assets, which can potentially make a $4m capital gain tax-free.
The team at Hansens is here to help you create an effective tax strategy that will position you and your business to take full advantage of opportunities in the current economic environment. We can also talk to you about your business, and turn the numbers into knowledge.
Give us a call today!