Small and medium businesses will again be front and centre in the federal budget, with Treasurer Scott Morrison tonight expected to announce a cut to company tax for Australian businesses turning over up at $10 million annually.
Dubbing SMEs “the hope of the side” for creating jobs and economic growth, Fairfax reports Morrison will cut the rate of corporate tax from 30% to 27.5% for incorporated businesses under this turnover threshold.
The tax cut will build on small business package contained in the 2015 federal budget, which involved a 1.5% company tax cut for incorporated businesses turning over up to $2 million annually and a 5% income tax “discount” of up to $1000 for unincorporated businesses.
The government is also expected to extend the eligibility for its $20,000 instant asset write-off scheme to businesses under the $10 million turnover threshold.
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The scheme, which currently applies to businesses with up to $2 million in annual turnover, is due to end in June 2017.
While the vast majority of small businesses across Australia would have qualified for the $2 million threshold from last year’s budget, a higher threshold will mean thousands more SMEs will not qualify for the lower tax rate.
The big end of town is also in line for a corporate tax cut, however, it is expected the reduction from 30% to 27.5% will be phased in over a period of time.
Fairfax reports the tax cuts will be funded by further strengthening of the government’s existing rules on multinational tax avoidance, which were also introduced in last year’s budget.
This will occur alongside what is being labelled as a “Google tax” or a more aggressive tax applied to profits that are diverted between jurisdictions.
Revenue is also expected to be raised via a hike to tobacco excise, which the government said on Monday will raise $28 billion over 10 years. Labor had previously said its proposal to raise the tobacco excise would raise $47 billion in the same time frame.
COSBOA labels tax cut “extraordinary”
Peter Strong, chief executive of the Council of Small Business of Australia described the slated tax cut as “extraordinary” when speaking to SmartCompany this morning.
“The $20,000 instant asset write-off last year was a big shock – this is up there with that,” he says.
“It will have a big impact on the economy and the capacity for businesses to grow. People in that group – $2 to $10 million [in turnover] – are much more likely to grow.”
Strong says medium-sized businesses are often overlooked by policymakers, given the current hype around startups.
“Medium businesses have sort of fallen off the agenda,” Strong says.
“So the fact the Treasurer says ‘small and medium’ businesses is really good news. Medium businesses employ a lot of people and want to grow, but they suffer just as much from the behaviour of big businesses and the big unions.”