I promised you three case studies, here is the third one re #budget16 and what it might mean for small business in Gladstone.
This well-known and respected family construction company is expecting its turnover to be around $3mill which means it is NOT currently defined as a SBE for the 2015-16 FY.
However, if the budget is passed this business will be eligible in 2016 -17… providing turnover stays under $10mill.
So what does this mean??
As an SBE they will be taxed at 27.5% from 1 July whereas they will pay tax at 30% this financial year.
Their big question
They need to consider whether their excavator needs some major repairs, perhaps in the realm of as much as $50,000. Their big question is “Should we get the work done before 30 June or after? “
The implications of their decision
Based on tax alone, the calculations are as follows:
- Tax rate before 30 June is 30.0%
- Tax rate after 30 June will be 27.5%
- Saving 2.5% of $50,000
- or $1,250
It may be money better spent…
That’s $1,250… you might be able to spend that on a new laptop for the business.
Like deferring income, bringing forward expenses has a cash flow impact.
These repairs will need to be paid earlier than previously intended, it is also worth considering the impact on taking a piece of equipment out action when it may be needed.
It’s important to make a considered decision and figure out if bringing expenses forward will place them under cash flow pressure.
What to do
This is exactly where a qualified financial advisor can help… no matter what you do consult with an expert to ensure you are making the right decision for you and your family.