Still uncertain, amid all the hype, about what the budget actually means for SMEs? Our budget wrap outlines everything you need to know.
While the media went into overdrive last night judging the government on the measures, the salient points of what matters to Australia’s SMEs got somewhat lost in the mix.
Here’s an outline of what was announced:
• As widely anticipated, the government will cut the business tax rate for SMEs to 27.5 per cent, effective from 1 July 2016. Businesses with annual turnover of less than $10 million (previously $2 million) will benefit from the tax cut. It is estimated some 870,000 businesses will benefit from the tax cut come July.
• In the longer term, the government plans to extend the lower tax rate to all companies and progressively reduce the rate to 25 per cent over the next decade.
• SMEs are expected to be major beneficiaries of an $840 million youth employment program called Jobs PaTH (Prepare-Trial-Hire), which is aimed at improving the employability of young people and transitioning them into full-time work.
• For businesses that are not set up as companies, the unincorporated tax discount will increase substantially from 5 per cent to 8 per cent from 1 July 2016. Over the next 10 years, this will progressively double to 16 per cent. The discount is available to small businesses with annual turnover below $5 million, and is capped at $1,000 per individual each year.
• The government announced plans to trial simplified BAS reporting measures in the new financial year which, if successful, will be implemented on 1 July 2017.
• It will also undertake a cost benefit analysis of implementing electronic invoicing, in a bid to reduce the overlaps and repetitive invoice data input that SMEs currently face.
• SMEs overall are diligent in paying their fair share of tax, and as such they will be pleased to hear that the government will be cracking down on tax avoidance measures used by multinational corporations.
• There was much speculation leading up to the budget that the instant asset write-off may be extended or made permanent for SMEs, however this was not the case. The $20,000 instant asset write-off will remain in place until 30 June 2017 as originally stipulated last year. Every asset purchased up to that value can be used to claim an immediate deduction.
• The expansion of the asset write-off threshold to firms turnover of with up to $10 million does not extend to small business capital gains tax (CGT) concessions. The threshold for these concessions will remain at $2 million.
• Despite initial suggestions to the contrary, there were no income tax cuts announced for individuals. The only major change to personal taxation is the readjustment of the middle tax bracket from $80,000 to $87,000 from 1 July 2016, which the government said will keep an estimated 500,000 individuals in the 32.5 per cent marginal tax bracket.
• The controversial ‘backpacker’ tax on short-term foreign workers will remain in place, much to the chagrin of many tourism and hospitality operators as well as primary producers.
The important thing to remember is that Prime Minister Malcolm Turnbull has publicly said he will call a double dissolution election this week. This means that parliament will not sit again until after the election, anticipated for 2 July, and as such any measures requiring parliamentary approval will depend on the outcome of the election.
Opposition leader Bill Shorten will give his budget reply speech tomorrow night, in which he is expected to outline which measures Labor would retain, alter or scrap should it win the election.