The Federal Budget offered small business some useful concessions, as our finance editor Tiffany Hutton explains.
The Federal Budget contained some surprises for small business, but other announcements were expected.
The Government had already announced that it was dumping the unwieldy Entrepreneurs’ Tax Offset — as expected — and replacing it with a $5,000 across-the-board deduction for new vehicle purchases. According to Wayne Swan’s Budget address last night, many small businesses rely on their ute or van, so this deduction makes sense. It sounds to me like the Government thinks all small businesses are tradies — I personally know a lot of SME owners for whom a vehicle is not a top priority. But maybe that’s just me. If you do need a new vehicle, this deduction is probably welcome news, and is certainly simpler to access than the now defunct ETO.
So what else is there in the Budget for small business? Nothing startling, but the Government does like to stress that small business is ‘the backbone’ of our economy, so there are a few crowd-pleasers. In addition to the vehicle deduction, there’s also the immediate write-off of all assets valued at under $5,000 (previously $1,000), plus changes to depreciation that should make things simpler and cheaper.
There’s also a cash flow benefit (estimated at $700 million) in the form of a tax adjustment for 2011-12 — income tax instalments paid under PAYG will be reduced (halved, actually) for one year. It is only for the one year, but no one in their right mind would knock a cash flow boost.
For incorporated small businesses, the company tax rate comes down to 29%, and there’s also an extra $7.1 million for the Small Business Support Line, which is used largely by newer businesses — more free advice for start-ups has to be a good thing.
Bigger picture-wise, the Buy Australian initiative ($34.4 million) aims to spread the opportunities from the resources boom, by helping small companies grow as suppliers to the resources sector, so there are likely to be some opportunities for those in relevant industries. The focus on skills should also have some knock-on benefits for business of all sizes.
All in all, probably at least as good as we could expect. Your thoughts? Let us have 'em below in the Disqus field.