Lowering the small business tax rate to 27.5 per cent from 1 July is the biggest win for Australian business out of this year’s Federal Budget.
More than 870,000 organisations across the country are likely to benefit from the cut to the corporate tax rate for businesses with turnover of up to $10 million.
“CCI estimates approximately 87,000 WA businesses will benefit from the changes to the corporate tax rate announced in the Federal Budget,” CCI’s Director of Policy Dale Leggett says.
“Confidence in the WA economy has been sluggish for some time, but the tax changes in the budget combined with yesterday’s interest rate cut to 1.75 per cent will be a real boost to local sentiment.
“Through this decision, the government has given business the tools to drive growth and innovation and we expect business will see an increase in consumer spending over coming months.”
Business expectations ahead of the budget were low, Leggett says.
“Given that business had come to think there would be no tax reform in this budget, there is a lot in this document to inspire confidence about the future,” he says.
“The $9.2 billion tax reform package is recognition from the Federal Government that empowering Australian businesses to do what they do best is the best way to grow jobs and prosperity in Australia.”
More business wins
CCI also welcomes Federal Budget announcements that:
- Businesses with a turnover of less than $10 million will be able to access instant tax write-offs for equipment purchases of up to $20,000 for an extended period (until 30 June 2017).
- And the tax discount for unincorporated small businesses will be increased to eight per cent, while the turnover threshold for unincorporated small businesses will increase from $2 million to less than $5 million.
“Perhaps most importantly, these reforms will be extended over the next decade, which could have wide-reaching implications for businesses and the economy,” Leggett says.
“The turnover threshold for being able to access to the lower company tax rate of 27.5 per cent will increase annually.
“By 2017-18, business with a turnover of $25 million will be able to access the lower rate, and by 2019-20 those with a turnover of $100 million will be eligible.”
As part of the next stage, the lower tax rate will continue to be extended so all businesses are eligible by 2023-24. The company tax rate of 27.5 per cent will then be lowered to 25 per cent by 2026-27.
“This will ultimately bring Australia in line with the OECD average of 25 per cent,” Leggett says.
“These are important reforms that will promote investment and innovation, and improve local competitiveness in an international context.”
Work training for young people
CCI welcomes on principle the announcement of the Youth Jobs PaTH initiative, which is based on the Australian Chamber’s training-to-work proposal, as a means to enable businesses to provide job-readiness training for vulnerable young jobseekers.
Host employers will be provided $1000 to support training and then be eligible for up to $10,000 in support paid over six months if they ultimately hire the job seeker.
Leggett says: “We want to see more detail around how this will work in practice because the bigger picture is that training expenditure is well behind where it should be at the moment.”