There are three things for small business to take away from the government’s tax reforms:
1. The wins for small business
- The company tax rate will move from 30% to 28% – fast-tracked for small business to 2012-13. While it’s not the 25% rate advocated by Henry, this will be a welcome move.
- Assets valued under $5,000 can be immediately written off.
- All other depreciating assets, excluding buildings, can be pooled and depreciated at a single declining balance rate of 30%.
2. The flipside
Yes, that would be the increased super requirements. They’re to be phased in as follows:
- 2013 – 14 9.25%
- 2014 – 15 9.5%
- 2015 – 16 10%
- 2016 – 17 10.5%
- 2017 – 18 11%
- 2018 – 19 11.5%
- 2019 – 20 12%
The timeframe is intended to allow for wage negotiation, so that businesses don’t absorb the full cost. The question is whether this will raise operating costs or lower take-home wages, but the tax cuts and simplified capital allowance (above) should help ease the burden for small businesses.
3. The missed opportunities
Many of Henry’s small business suggestions have been left for future consideration in a disappointingly minimal approach to the review. These include:
- Small business threshold: recommended increase from $2m to $5m.
- Payroll tax to be abolished in favour of more efficient taxation.
- Stamp duty replaced by broader, consumption-based taxes to encourage investment.
- Tax system reform to simplify small business engagement with the ATO.
Precisely which reforms will be taken up should the Government win a second term hasn’t been revealed, but there’s a lot of room – and need – for improvement in these areas.