Budget 2015 | Stand Up Small Business Owners Its Your Turn to Shine

14th May 2015

The 2015 - 2016 Budget announced by the Australian Treasurer, Joe Hockey on Tuesday evening includes an array of measures to support small business owners. You will have already heard the good news that company tax has been reduced to 28.5% for businesses earning revenue of less than $2m per year but there are other measures such as the $20,000 accelerated asset depreciation, exemption from FBT for additional electronic devices to employees, and immediate deductibility for professional expenses.

There are also several initiatives that may impact on the entitlements provided to employees of all businesses. The government will impose a $5,000 grossed-up cap on the fringe benefit taxation exemption applied to meals and entertainment benefits provided to employees in not-for-profit organisatons. The Treasuer also announced changes to the entitlement to government paid parental leave where an employee already has access to paid leave provided by their employer. Terminally ill employees will be able to access their superannuation sooner and some changes to facilitate employee share schemes.

Listed below is a summary of the announcements that may impact your business.

Meals and Entertainment fringe benefits

A separate single grossed‑up cap of $5,000 for salary sacrificed meal entertainment and entertainment facility leasing expenses (meal entertainment benefits) for employees will be introduced from 1 April 2016. Meal entertainment benefits exceeding the separate grossed‑up cap of $5,000 can also be counted in calculating whether an employee exceeds their existing fringe benefits tax (FBT) exemption or rebate cap. All use of meal entertainment benefits will become reportable. Currently, employees of public benevolent institutions and health promotion charities have a standard $30,000 FBT exemption cap (this will be $31,177 for the first year of the measure, due to the Temporary Budget Repair Levy) and employees of public and not‑for‑profit hospitals and public ambulance services have a standard $17,000 FBT exemption cap (this will be $17,667 for the first year).

Paid Parental Leave

Starting 1 July 2016, individuals will not be able to access the government Paid Parental Leave scheme if receiving any employer-provided parental leave entitlements that are at least equal in value. The government states it will ensure that all primary carers would have access to parental leave payments that are at least equal to the maximum Paid Parental Leave benefit (currently 18 weeks at the national minimum wage) i.e. it will top-up the benefit to the level of the government PPL scheme. It is not clear how it intends to administer and monitor this, but most probably it will require employers to disclose information on benefits provided to the employee.

Superannuation Access for Terminally Ill

From 1 July 2015, the Government will extend access to superannuation for people with a terminal medical condition. Currently, patients must have two medical practitioners (including a specialist) certify that they are likely to die within one year to gain unrestricted tax free access to their superannuation balance. The Government will change this period to two years. This will give terminally ill patients earlier access to their superannuation.

FBT exemption for two work-related portable electronic devices

The Government will allow a fringe benefits tax (FBT) exemption from 1 April 2016 for small businesses with an aggregated annual turnover of less than $2 million that provide employees with more than one qualifying work‑related portable electronic device, even where the items have substantially similar functions. Currently, an FBT exemption can apply to more than one portable electronic device used primarily for work purposes, but only where the devices perform substantially different functions. So, you can provide an iPad and a laptop computer.

Employee Share Schemes

Consultations on draft legislation to implement changes to the taxation of the employee share schemes announced in the Mid‑Year Economic and Fiscal Outlook 2014‑15 (MYEFO) identified some minor technical changes that could be made to the legislation. This measure addresses these issues by:

• excluding eligible venture capital investments from the aggregated turnover test and grouping rules (for the start‑up concession);
• providing the capital gains tax discount to employee share scheme interests that are subject to the start‑up concession, where options are converted into shares and the resulting shares are sold within 12 months of exercise; and
• allowing the Commissioner of Taxation to exercise discretion in relation to the minimum three‑year holding period where there are circumstances outside the employee’s control that make it impossible for them to meet this criterion.

These changes will take effect with the remainder of the enabling legislation from 1 July 2015.

Many of these measures will require legislative changes before they can be implemented, so we will keep you up to date on progress through the Parliament All of these budget initiatives may be read from the Budget Papers. Please contact me if you wish to discuss this topic or any other matter affecting your business.