SMEs were again pushed to the front of the Federal Budget receiving another tax cut and with the announcement there will be an increase in the number who can claim it. Here’s what you need to know.
With a sense of déjà vu, the government has put its money on the SME community to ignite the economy for a second year running with $2.2 billion worth of tax cuts over the next four years.
For Treasurer Scott Morrison, the message he will be spruiking over the next few days will be simple. Small business is good for jobs, so it’s good for the economy.
In his Budget speech this week, he singled out small and medium businesses as “driving jobs growth and (they) must continue to do so”.
“They are also overwhelmingly Australian owned and more likely to reinvest their earnings in future growth, as they seek to build their businesses,” he said.
The tax cuts will start on July 1 (election eve).
Getting the lowest tax rate
Small business will now pay the lowest company tax rate of 27.5 percent from July 1. Last year, the rate was cut from 30 to 28.5 percent (for businesses with a turnover of less than $2 million).
That threshold of what determines a small business ($2 million) has also been increased to $10 million so the number of businesses now getting the full tax break will reach a total of 870,000 businesses (up 90,000 from last year) who employ 3.4 million Aussies.
What happens to my instant tax write-off?
Getting a lot of attention last year was the instant tax deduction for business equipment under $20,000 for SMEs.
While it still runs until June 30, 2017, it has been extended to businesses under the $10 million turnover bracket (rather than $2 million).
The scheme was a hit with SMEs last time around. Businesses made claims worth almost $800 million in the past financial year which was almost double that of the previous year.
Small Business Minister Kelly O’Dwyer said the measures will help SMEs “innovate, grow and create more Australian jobs”.
“So far, more than 40,000 additional businesses have instantly written off assets in the 2014-15 year as compared to the year before,” she said.
Extended tax concessions to more SMEs
Lifting the threshold to $10 million gives more SMEs access to tax concessions including depreciation pooling provisions, simplified trading stock rules (businesses can drop end-of-year stocktake if it’s changed by less than $5000), and PAYG instalment payment options.
Also employers will be eligible for a “youth bonus” wage subsidies for taking on young job seekers (between $6500 and $10,000).