Small business have delivered decidedly mixed reviews of the Government’s response to the Henry Review, welcoming a 2% cut in company tax and immediate asset write-off provisions but rejecting a 3% increase in mandatory super payments.
Small businesses with turnover of less than $2 million will benefit from the lower tax rate of 28% from July 1, 2012, with all businesses able to write-off assets worth up to $5,000 from July 1, 2012.
Jaye Radisich, chief executive of the Council of Small Businesses of Australia, says the main benefits for small business will enable tax benefits in the thousands and help reduce cashflow burdens.
“The Government’s tax package recognises that the vast majority of businesses operating in
Australia are small businesses, and that’s a very important starting point for tax reform,” she said.
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“The new tax measures are set to help improve small business cashflow, support increases in production and productivity and promote innovation and entrepreneurial activity.”
Radisich said that while the Review recommended a cut in the corporate tax rate to 25%, the proposed 2% cut to 28% will still “provide a strong cashflow boost” and that the small business head start will encourage more entrepreneurs to enter the industry.
Additionally, the changes will see the Government introduce a new method for businesses to depreciate assets worth over $5,000 at a 30% rate, instead of using two separate rates. Radisich says the simplification of business tax is a welcome move.
“It is reassuring that the Henry Review and the Government have recognised that small businesses tend to bear a higher proportion of the burden of tax administration, and are more likely to be held back by red tape and complexity than larger businesses.”
However, Radisich believes there are definitely areas for improvement. She said there is “little doubt” the superannuation guarantee increase of 3% will be passed on to consumers, despite the seven-year period in which that increase will be made.
“The Council is disappointed that the Government has not sought compulsory superannuation contributions from employees.”
“It is essential that the work to simplify Australia’s tax system is ongoing, so that the nearly two million small businesses in Australia can be as productive as possible, and can spend their time innovating and creating jobs, rather than reporting to the ATO.”
Russel Zimmerman, chief executive of the Australian Retailer’s Association, says his industry has been “short-changed’ and that there should have been more included in the Government’s response – including the abolition of payroll tax.
“We’ve very happy to see the write-off proposal for assets under $5,000, but we feel that payroll tax should have been looked at fairly seriously, and we would have liked to have seen it abolished completely.”
“The 2% reduction in the company tax rate is obviously very good, but we would have liked to have seen the definition of small business lifted from $2 million turnover to $5 million.”
Additionally, Zimmerman says he fears that the increase in superannuation payments until 2019 will negate any of the benefits for small businesses.
“I would have thought that the superannuation payments should have come as an employee contribution rather than an employer contribution, and that would have been rather nice to see. Obviously we’ll be lobbying the Government about this, I understand that ACCI will be doing so as well, so we’ll be talking about these topics in the future.”
Ray Cummings, partner at Pitcher Partners, says he is “underwhelmed by the Government’s response” and expected more of the 138 recommendations to be taken up.
“The Government has definitively ruled out around 30 of these but been largely silent on the other recommendations. It has stated that the steps announced today “are the first steps in a 10-year agenda” but it hasn’t been prepared to say what that agenda might be.”
Additionally, Australian Industry Group chief executive Heather Ridout, who was a member of the Review panel itself, told ABC Radio that she hopes the Government will do more, and that there is a “huge number” of state taxes that need to be reformed.
“We have got all these inefficient state taxes (that) aren’t going to raise the money to even pay the 40% of the hospital budget.”