Hundreds of thousands of Australian small businesses will have a little more cash left in the kitty next June after corporate tax cuts were confirmed in the recent federal budget.
Treasurer Scott Morrison used his second budget to restate the Turnbull Government’s strong commitment to reducing the tax burden on small businesses.
Other positive news for small business unveiled in the nation’s financial accounts included:
* An extension for another year of the popular $20,000 instant asset write-off
* Rewards for states that reduce red tape and regulations on business
* Measures to support investment in new business startups
* A crackdown on the so-called ‘black’ or cash economy
* Downsizers allowed to contribute up to $300,000 to their superannuation
* Massive spending on infrastructure to boost regional economic growth
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Mr Morrison mentioned small business in the first few seconds of his budget speech, telling Parliament small business owners “have gone without to keep their businesses open”.
“Small business owners are out there fighting for growth in their businesses every day. They deserve our respect and support,” he said.
As previously passed by Parliament, companies with a turnover of up to $10 million now attract a lower tax rate of 27.5%. Moreover, the $10 million threshold has been legislated to be lifted to $50 million over the next two years. The budget reaffirmed the government’s intention to extend company tax relief such that all companies will pay a 25% rate by 2026/27.
“A lower corporate tax rate promotes business investment by raising the return from investing in Australia,” said Morrison.
“Increased business capital is expected to raise productivity and real wages and permanently expand the economy by just 1% in the long term.”
The budget also made reference to the black economy, where businesses use cash payments to avoid tax.
It included extra funding for the Australian Taxation Office to continue a government crackdown on multinational companies.
The Diverted Profits Tax aims to stop multinationals shifting profits earned in Australia offshore to avoid tax. It has been nicknamed the “Google tax” because the tech giant restructured its tax affairs in anticipation of the new laws.
“By paying their fair share of tax, all individuals and businesses who earn income in Australia help fund the vital services and infrastructure needed to support the Australian community,” said Morrison.
He said the government was committed to maintaining the integrity of the tax system and levelling the tax playing field, and to date had raised $2.9 billion in tax from several large multinational companies through anti-avoidance measures.
Earlier this year, Mr Morrison endured a tough battle to secure Senate support for laws to reduce the tax rate from 30 per cent to 27.5 per cent for companies with revenue of up to $10 million.
The legislation impacted about 3.2 million Australian companies, employing approximately 6.5 million people.
These same businesses will be hoping the government can get the next round of tax cuts through the nation’s Upper House.
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