With just nine weeks to go until the federal election, this year’s budget announcement wasn’t the free-for-all that the electorate came accustomed to in budget/election combo in years past.
While there were a number of clear losers, small business definitively emerged with a blue ribbon.
From July 1 small business will get a tax cut from 30% to 27.5%. The pool of those actually eligible for the cut has also been extended, essentially extending the definition of a small business.
The government has taken the annual earnings threshold from $2 million to $10 million to include a further 90,000 businesses.
Sole traders weren’t left out in the cold, with an additional 3% added to the tax discount for unincorporated firms. The discount will be extended from 5% to 8% next financial year, to reach 16% over the next 10 years.
Between now and 2023-24 the cut will gradually be extended to include all businesses. The measure builds on a 1.5% tax cut in last year’s budget for businesses bringing in under $2 million annually.
Overall by 2026-27, the plan is to decrease the overall rate to 25% – time will tell.
In his budget speech to parliament last night, Treasurer Scott Morrison said the small and medium business sector was Australia’s main driver of economic growth.
“Small and medium businesses are driving jobs growth in Australia and must continue to do so,” Mr Morrison said.
“They are also overwhelmingly Australian owned and more likely to reinvest their earnings in future growth, as they seek to build their businesses.”
“Tonight we go further and share the ambition for small businesses to become bigger businesses,” he said.
The popular instant asset write-off was retained for another year and is a measure that the government wants to gradually extend to more businesses. From July 1, businesses turning over less than $10 million can reduce their tax bill by applying to fast-track new, depreciating assets worth up to $20,000.
Given that in the last financial year small business made claims to write-off almost $800 million in new assets, there’s no doubt this measure will once again prove popular.
“So far, more than 40,000 additional businesses have instantly written off assets in the 2014-15 year as compared to the year before,” Minister for Small Business and Assistant Treasurer Kelly O’Dwyer said.
Overall, the government believes the raft of measures will cut small business tax by some $2.2 billion over the next four years.