Small business was the ultimate winner, with a number of measures introduced that reflected our pre-Budget submission recommendations.
As promised, the government delivered a 1.5 per cent corporate tax cut for those small businesses that are incorporated and have an annual turnover of less than $2 million. Our concern that only
incorporated businesses would see such a tax break was alleviated with non-incorporated entities receiving a tax discount of 5 per cent, up to the cap of $1,000.
This is the first small business tax cut in 13 years.
We are pleased, therefore, to see the government adopt the IPA’s signature tax policy of reducing the tax rate or all businesses in this sector, regardless of structure.
But there was even more good news for small business. The government announced an increase from $1,000 to $20,000 in the accelerated depreciation write-off threshold. Eff ective immediately for all small businesses, the new threshold applies to each and any individual asset that costs less than $20,000 – a signifi cant boost for cash flow.
This asset write-off initiative is bringing forward the tax deduction that would have been deductible over a number of years. For example, if a small business makes a profi t of $50,000, the tax payable at the new company tax rate would be $14,250. The deduction of a business-related asset up to $20,000 would reduce the taxable profi t to $30,000 with a tax payable amount of $8,550: a tax saving of $5,700. For a non-incorporated small business, the tax saving will be dependent on the individual’s marginal tax rate.
This will have major flow-on eff ects for the broader economy. More cash to invest in the economy makes this initiative a winning proposition all round.
Other positives stemming from the Budget include significant reductions in red tape through such initiatives as the Streamlined Business Registration service, plus a special write-off for start-up companies to help with professional expenses.
All in all, it’s a good package to drive small business productivity and growth, which are key ingredients required right now for Australia’s economic wellbeing and prosperity.
Andrew Conway FIPA
