Federal Budget 2016: Small business players just had a BIG win
BUDGET 2016: SCOTT Morrison is betting on small business to drive the economy — handing out $2.2 billion worth of tax cuts over four years so spur ideas.
NSW
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SCOTT Morrison is betting on small business to drive the Australian economy — handing out $2.2 billion worth of tax cuts over four years on the understanding it would create jobs and spur ideas.
“Small and medium businesses are driving jobs growth in Australia and must continue to do so,” the Treasurer told parliament last night.
“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 kick in on July 1 — election eve.
They will mean handing $295 million of tax savings to small business in the first year. Smaller firms win a reduction in tax of 1 per cent while those turning over between $2 million and $10 million get a 2.5 per cent discount thanks to the Budget.
It means 870,000 small business will pay the cheapest company tax rate of 27.5 per cent from July 1. Compared to the previous year, another 90,000 businesses are eligible for the lowest rate thanks to the wider definition of small business.
Mr Morrison yesterday said that taxing small business was a “tax on their enterprise and the jobs they provide”.
Last year’s Budget cut the small business rate to 28.5 per cent from 30 per cent.
“Tonight we go further and share the ambition for small businesses to become bigger businesses,” he said.
The government estimates small business will save $2.2 billion in tax over four years.
Small business will continue to pay 27.5 per cent tax until 2024, when lower tax rates for all business gradually kicks in, tracking down to 25 per cent by 2026-2027.
Small Business Minister Kelly O’Dwyer said Treasury’s new definition of small business to a turnover of $10 million means those employing 5.5 million Australians now qualify for the small business tax cuts.
“Small businesses are the engine room of the economy,” Ms O’Dwyer said.
“These measures will help small businesses to innovate, grow and create more Australian jobs.”
And the $20,000 instant asset write-off for new equipment for small business has been extended for another year, to July 2017.
Small business made claims under the asset write-off worth almost $800 million in the past financial year — almost double the previous year.
Companies eligible for the write-off for equipment purchases was also extended beyond those with a $2 million turnover to include those earning up to $10 million.
“So far, more than 40,000 additional businesses have instantly written off assets in the 2014-15 year as compared to the year before,” Ms O’Dwyer said.
Sole traders also got a bonus set to save them $150 million in 2017-18, with an additional 3 per cent added to the tax discount for unincorporated firms.
The discount will be extended from 5 per cent to 8 per cent next financial year and to 16 per cent over the decade.
Cake maker Daniella Boutros now has an extra sweetener as a result.
She can look forward to paying tax of 25 per cent, down from 28.5 per cent.
She considered giving up her Canterbury high end cupcake business Buttercreme Lane two years into the venture but found a business coach who has helped her grow to 12 staff.
The tax cut comes at the right time for the 25-year-old.
“Who doesn’t want to see a discount on their taxes?” she said.
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