Australian Treasurer Outlines Small Business Tax Reform

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

28 July 2011

Tax reform was the focus of Wayne Swan’s speech to the Council of Small Business of Australia in Sydney this week, and he was keen to stress the importance of the measures being delivered by the government at the moment to help small businesses adjust to the changing economy and boost their productivity.

The Australian Treasurer said: “I have always been a believer in tax reform – that's why I commissioned the Henry Review in the first place. And that's why we are delivering on significant tax reforms for small business. Tax reforms that provide cash-flow relief for small business, while also encouraging investment and innovation.”

He said that the government was making it easier and simpler to instantly write-off against tax more of the investment goods that businesses need. This included increasing the write-off to AUD6,500 (USD7,155) from the 2012-13 income year, and in this year's budget it was announced that people could instantly write off up to AUD5,000 of a vehicle.

He referred to the fact that if a small business spent AUD6,000 on a computer system they could currently deduct AUD900 in the first year which could reduce their tax bill by AUD270, at the 30% company tax rate. But he didn’t think that enough small businesses knew that the change from 2012-13 will mean the same business will be able to claim the whole AUD6,000 up-front and could reduce their tax bill by AUD1,740, at the 29% company tax rate that will apply then.

“That's a AUD1,500 cash flow advantage for small businesses and one way to reward businesses that invest to grow,” he said.

He pointed out that the AUD6,500 instant asset write-off isn't a cap, and applies to as many assets as a business buys, where each is individually under AUD6,500. The government is also streamlining the depreciation arrangements for assets worth AUD6,500 or more.

“Combined, this means something like an extra AUD1bn of extra cash flow for small business in 2013-14 alone, and less time accounting for depreciation. It's another way this year's Budget sought to spread some of the benefits of the mining boom,” Swan said.

The company tax rate is being cut for the 720,000 small businesses that do operate as companies, and they are being given a year's head start on the big companies for that. And there is AUD700m of cash flow benefit on the way that comes from lower quarterly income tax instalment payments for small businesses and other eligible taxpayers this year.

The tax benefit for R&D is being increased from 37.5 cents in the dollar to 45 cents in the dollar for small and medium-sized businesses. Allowing for the normal tax deduction that would otherwise be claimed, the Treasurer said that this represents a doubling of the existing 7.5 cent in the dollar concession. The R&D cash is also being paid quicker to help small businesses innovate and compete.

“So we've got some good initiatives in place – some of them in place now, some coming in next year, all of them important. They haven't dominated the front pages, but we're confident they'll give you a bit of help as you navigate these choppy waters. And we want to know what more we can do to assist you in the years ahead,” Swan told the conference.

Recommended