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Australian Senate Passes Small Business Tax Reforms

by Mary Swire, Tax-News.com, Hong Kong

14 June 2007

New tax laws, which will standardise the eligibility criteria for Australia's small business tax concessions from 1 July 2007, have passed through the Senate.

Minister for Revenue and Assistant Treasurer, Peter Dutton, said that under the new legislation, know as the Tax Laws Amendment (Small Business) Bill 2007, small businesses will only have to apply one eligibility test relating to the size of the business, to access a range of small business concessions.

“Any business with aggregated annual turnover of less than A$2 million will be able to access any of these concessions, subject to satisfying any existing eligibility criteria not related to business size,” Mr Dutton said.

“The previous law had separate eligibility tests for the goods and services tax (GST), the Simplified Tax System, the capital gains tax (CGT), the fringe benefits tax (FBT) and pay as you go (PAYG) instalments small business concessions,” he added.

Minister for Small Business and Tourism, Fran Bailey observed: “Small businesses meeting the new A$2 million annual turnover test will be able to choose those concessions that meet their business needs — businesses will not be obliged to adopt any concessions not suited to their requirements."

These concessions are:

  • CGT 15-year asset exemption
  • CGT 50% active asset reduction
  • CGT retirement exemption
  • CGT roll-over provisions
  • simpler depreciation rules
  • simplified trading stock rules
  • immediate deductions for certain prepaid business expenses
  • choice to account for GST on a cash basis
  • annual apportionment of input tax credits for acquisitions and importations that are partly creditable
  • choice to pay GST by instalments
  • FBT car parking exemption
  • PAYG instalments based on notional tax.

Small business entities will also have the benefit of a two-year amendment period.

Existing eligibility thresholds for accessing CGT, FBT and PAYG instalments concessions will be retained.

A single definition of small business will result in reduced compliance costs for up to 2 million Australian small businesses.

“This demonstrates again the government’s commitment to reducing red tape and compliance costs for small businesses,” Fran Bailey said.

This legislation, which passed through Parliament on Wednesday, also contains other measures announced in the 2006-07 Budget to improve access to small business concessions. These measures include:

  • increasing the maximum net asset value test for accessing CGT concessions from A$5 million to A6 million;
  • extending the roll-over relief available under the uniform capital allowance regime to any business with a turnover of less than A$2 million that chooses to deduct amounts for depreciating assets; and
  • increasing the GST cash accounting threshold from A$1 million to A$2 million.

The total cost to government of the measures in this bill, and savings to small business, is A$295 million over the forward estimate period, Dutton said.

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