Business is a big winner in tonight’s Commonwealth Budget, and the Federal Government has implemented a variety of tax reforms, some of which the Chamber of Commerce and Industry of Western Australia have previously publically advocated for.
Company Tax Reform
The Commonwealth Government has announced substantial tax reform that will improve the business environment.
- The ten year Enterprise Tax Plan will lower the small business tax rate to 27.5 per cent from 1 July. Also, the turnover threshold for small businesses able to access it will be significantly increased from $2 million to $10 million. This will increase the number of business that will qualify as a small business for tax purposes, and allow them to access a variety of tax incentives, including the small business depreciation pooling provisions, simplified trading stock rules, and Pay-As-You-Go Instalments payments option.
- Businesses with a turnover of less than $10 million will also be able to access instant tax write offs for equipment purchases of up to $20,000 for an extended period (until 30 June 2017).
- The tax discount for unincorporated small businesses will be increased to 8 per cent, and the turnover threshold for unincorporated small businesses will increased from $2 million to less than $5 million.
- Perhaps most important, these reforms will be extended over the next decade, which could have wide reaching implications for businesses and the economy. 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%. These are important reforms that will promote investment and innovation, and improve local competitiveness in an international context.