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Recent ATO changes for ‘small business entities’ and companies

By | November 14, 2018

There have been some recent updates passed through Parliament relating to small business entities and companies. These will be outline for you accordingly.

Updates for ‘small business’ entities

The 3 main things to note are as follows:

  • No changes to eligibility criteria until 30 June 2019
  • $20,000 immediate asset write-off has been extended through to 30 June 2019
  • Fodder storage assets (silos, sheds, etc) used for storing feed for own livestock is now fully deductible upon purchase from 19 August 2018

Updates for companies

The company tax rate has changed to 27.5% for companies that meet the following criteria:

  • Company’s ‘passive income’ is no more than 80% of their entire assessable income
  • ‘Passive income’ includes:
    – Interest
    – Dividends
    – Trust distributions
    – Capital gains 

The requirement to be ‘carrying on a business’ has been removed.
If the above criteria isn’t met, the company tax rate will remain at 30%.

With the company tax rate changing, this impacts the imputation rate attached to franked dividends. To work out the imputation rate for dividends, you need to assume the company turnover, assessable income and level of ‘passive income’ will be the same as the previous year.

For the 2017-18 year, the imputation rate for dividends will be 27.5% if the following criteria are met:

  • Aggregated turnover in 2016-17 income year was less than $25 million; AND
  • Less than 80% of total assessable income in 2016-17 income year was ‘passive income’

OR

  • Company didn’t exist in 2016-17 year

For the 2016-17 year, the imputation rate for dividends will be 27.5% if the following criteria are met:

  • Aggregated turnover in 2015-16 income year was less than $10 million; AND
  • The company was deemed to be ‘carrying on a business’

If the criteria isn’t met, the imputation rate for dividends will be 30%.

To find out more information, please contact Altitude Advisory by clicking here and we will assist you with any queries you may have.

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