It’s been a long wait for SMEs eagerly anticipating the tax cuts promised during last year’s Federal Budget.
But business owners can finally see a light at the end of the legislative tunnel, which will see them benefit from a 2.5 per cent reduction in their company tax rate this financial year.
Treasurer Scott Morrison unveiled the Federal Government’s Ten Year Enterprise Tax Plan last May, promising lower taxes and more concessions for a greater number of businesses.
At the heart of the announcement was an immediate tax reduction for companies with an annual turnover of less than $10 million, by lowering their corporate tax to 27.5 per cent from the 2016-17 financial year.
The move, which was set to benefit around 870,000 companies across Australia, was beset by a host of delays, before finally being given the green light in the Senate on March 31 this year.
Businesses with higher turnovers still have longer to wait though, with the threshold to qualify for the lower tax rate not increasing to $25 million until 2017-18, before rising to $50 million in 2018-19.
This won’t be the end of the tax cuts however, with the rate for all these businesses progressively dropping to 27 per cent by 2024-25, and to 25 per cent in 2026-27.
The Ten Year Enterprise Tax Plan included more than just tax cuts. Changes were also made to the definition of “small business”, which meant that concessions previously available to businesses with a turnover of less than $2 million are now available to businesses with a turnover under $10 million.
This will give more than 90,000 additional small businesses access to everything, from simplified trading stock rules to an easier method of paying PAYG instalments calculated by the Australian Tax Office; as well as the option to account for GST on a cash basis and pay GST instalments as calculated by the tax office.
These businesses will also sneak into the final days of the $20,000 instant asset write-off scheme, which was originally introduced for businesses with a turnover of less than $2 million in the 2015-16 Federal Budget, and is due to expire on June 30 this year.
The scheme provides an immediate deduction of the full value of assets purchased (up to $20,000), instead of claiming depreciation over a number of years.
While there has been no indication either way, many business groups are hoping this month’s Federal Budget will include an extension to this asset write-off scheme.
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