Tax experts have slammed the Federal Government’s decision to scrap cutting the company tax rate in order to save $5 billion, saying SMEs have every right to feel betrayed and disappointed.
The move was just one of the hits targeted at SMEs, which have also seen the plan for a standard deduction plan scrapped altogether.
“I think businesses have a right to feel short-changed and abandoned by the Federal Government,” chief executive of the Tax Institute Robert Jeremenko told SmartCompany this morning.
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“The Government says they’re giving up the tax cut as a priority because of political opposition, but the tax cuts aren’t even introduced yet. They have support from the Greens for the small business cuts, and the job of the Government itself is to pursue policy reforms.”
The Government planned to cut the company tax rate from 30% to 29% from this July for small businesses, and from next July for big businesses. However, Treasurer Wayne Swan said there wasn’t enough political support, leaving the tax industry furious.
Head of policy at CPA, Paul Drum, also told SmartCompany he believes small businesses were disappointed “on a number of fronts”.
“For those businesses expecting a tax cut, they have every right to be disappointed.”
“These tax cuts are off the table until further notice, that’s not just a deferral. And our concern is what kind of message does that send internationally about Australia as a place to set up shop?”
In a statement, Institute of Chartered Accountants general manager Yasser El-Ansary said business confidence will “take a further big hit” from the decision to scrap the tax cut.
Wayne Swan said yesterday the Government is still committed to making the cuts, but deferring them is set to save $4.8 billion over four years and help Labor reach its surplus – it’s the single biggest cut in the entire budget.
“Our company tax cut has been rejected in full by the Liberals and Nationals, and in part by the Greens,” he said yesterday.
“We will not allow this parliamentary gridlock to deny Australians the benefits they deserve. So, in this budget, the funds for company tax cuts have been redirected to families in a way that also helps the economy, including small businesses.”
But the delay in the tax cut isn’t the only disappointing move. A proposed incentive to introduce a standard deduction for individuals in place of itemised deductions has been scrapped in a move saving $2 billion.
While this is sure to be welcomed by the accounting profession who will value the continued business, Jeremenko says it’s a disappointing move for many businesses and individuals who hate holding onto receipts.
“This means millions of people, and small businesses as well, will now have to stick with the shoebox of receipts method given to their accountant just to claim work related expenses.”
“The Government had a plan, but in a rush to grab as much cash as possible, have dumped a very worthwhile initiative that would have benefited plenty of people.”
There are some upsides, however. The loss carry-back initiative will help, and the extra payments to families will flow back into business coffers.
“The positive is the carry-back announcement,” says Jeremenko. “That’s definitely a good thing.”
CPA head of policy Paul Drum also praised the introduction of the $5,000 motor vehicle deduction – although recognises the measure has been announced for some time – and said the extra payments for families will seep through to SMEs.
“In the context of economic activity the consumption will be good for retailers, there’s no question about that. And I think it’ll be good for the economy overall.”
“But on the downside, these businesses expecting a tax cut have every right to feel disappointed. They had greater expectations of this budget, and they have the right to feel let down on a number of fronts.”