Small business to get tax relief: Kevin Rudd

SMALL business will get an "effective" tax cut by deferring part of their next tax instalment, Prime Minister Kevin Rudd said today.

SMALL business will get an "effective" tax cut by deferring part of their next tax instalment, Prime Minister Kevin Rudd said today.

Businesses with an annual turnover under $2 million will be allowed to postpone 20 per cent of their next Pay As You Go (PAYG) tax instalment - due in January and February - until they make their annual return.

The measure - to be announced by the government today - aims to offset tax liabilities, incurred during a time of higher growth, but paid when small business turnover is in decline because of the economic slowdown.

“What we're doing is to provide them with effectively a 20 per cent tax cut for the December quarter,” Mr Rudd said.

PAYG instalments are an estimate in advance of how much tax businesses expect to pay. If profits are bigger than expected, the difference in tax is paid at the end of the financial year.

If profits are smaller than estimated, businesses receive a refund on the tax they've paid.

“It's not a magic solution to everyone's problem,” Mr Rudd said, adding that it would help some business with their cash flow over a tough period.