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Case Study 2: #budget16

13.05.2016 by Neville Hughes

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.

But…

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.

Contact us to find out what #budget16 might mean for you!

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