The Federal Budget unveiled almost two weeks ago proved that the Federal Coalition are shifting their view from big enterprise to small business driving Australia’s economic future. It was a budget with a range of wins for small business, specifically those with a turnover of less than $10 million and if the measures are passed and can be retained over the next decade, they’ll have a huge positive impact on the success of our businesses.
1. Reduced Tax Rate
Over the next decade, the Federal Government will reduce the tax burden on small businesses by reducing the tax rate to 27.5% immediately for businesses with a turnover of $10 million or under and by 2026, reducing it to 25% for all small business with turnovers up to $1 billion. The tax reduction works as a slider bringing all small business onto an equal playing field over the next ten years.
2. Unincorporated Small Business Tax Discount
Businesses (not companies) with a turnover of less than $5 million will receive an additional 8% discount on their tax bill with the maximum discount available sitting at $1,000. Over the next decade this discount will expand to a final discount of 16%. The government estimates that around 2.3 businesses will have access to this discount each year.
3. Increased Tax Concessions
Existing tax concessions will be become more freely available as the government increases the threshold from $2 million to $10 million. The tax thresholds businesses will have access to include:
- Simplified depreciation rules, including immediate tax deductibility for asset purchases costing less than $20,000 until 30 June 2017
- Simplified trading stock rules, giving them the option to avoid end of year stocktake if the value of their stock has changed by less than $5,000;
- A simplified method of paying PAYG instalments calculated by the ATO, which removes the risk of under or over estimating PAYG instalments and the resulting penalties that may be applied;
- The option to account for GST on a cash basis and pay GST instalments as calculated by the ATO;
- Other tax concessions currently available to small businesses, such as fringe benefits tax (FBT) exemptions (from 1 April 2017 to align with the FBT year); and
A trial of simpler business activity statements (BAS), reducing GST compliance costs, with a full roll-out from 1 July 2017.
4. Access to financing sources
Asset backed financing will now be given the same tax treatment as conventional financing. This type of financing is suited to infrastructure support or development and large, long-term projects.
So there you have it – the benefits for small business outlined! Scott Morrison told The Australian that people “instinctively” saw that a strong small business would mean conditions were better for workers and the broader economy and given just how valuable the small business sector is to our economy, it’s about time. We as small businesses are responsible for the employment of over 3 million people and contribute $340 to our economy each year.
Backbone of Australia? We like to think so.
If you have any questions or would like to share your thoughts about the budget, please feel free to get in touch with us.