Budget 2009: Small business tax break boosted from 30% to 50%

The Federal Government will increase the business tax break for assets purchased before the end of 2009 from 30% to 50%.

This will apply for companies with turnover of less than $2 million.

The small business tax break was introduced earlier this year as part of the Rudd Government’s stimulus measures, and has been applauded by business groups as a way of assisting growing businesses through the downturn and stimulating economic growth by pulling forward investment.


Under the original model, the tax break was set at 30% for assets over $1000 that were purchased between 13 December 2008 and 31 December 2009 and installed by 31 December.


But under the new 50% tax break, the business will be able to claim a tax deduction of $15,000 (that is, 50% of $30,000).

The decision to boost the size of the tax break will cost $141 million, taking the total cost of the measure to $3.7 billion.


“The increased tax break provides small business with an even greater incentive to invest in new capital items, such as computer hardware and business vehicles, and to make capital improvements to existing machinery and equipment,” Small Business Minister Craig Emerson said in a statement.


In addition to this measure, the Government will spend $10 million over two years to establish a Small Business Support Line. The Government says this referral service, which will link in with the Government’s network of Business Enterprise Centres, will help small business owners seeking advice in areas such as financing, cashflow management, retail leasing, personal stress, hardship counselling and marketing.


The Government will pump an extra $50 million into the Export Market Development Grants scheme and also extend its exceptional circumstances assistance for farm-dependant small businesses.


After slashing almost $1 billion of entrepreneur-support measures in last year’s budget, this extra spending in this year’s budget will be welcomed by business group.


“Small businesses are the backbone of our economy, employing millions of Australians, but many have faced some tough times during this global recession,” Emerson says.


“That’s why the Rudd Government has been so determined to help small businesses invest with confidence and take advantage of the opportunities that will come with economic recovery.


But there will be some disappointment that a new $1.4 billion R&D tax credit scheme that will double the amount available under the existing R&D tax concession will not be introduced until 2010-11.


Instead, the Government has lifted the expenditure cap on eligible R&D that make a tax loss from $1 million to $2 million for the 2009-10 financial year. This measure will cost $65 million.


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