Tax breaks for small business
Financial planners running small businesses will be among the first to receive a reduction in the company tax rate, while conditions for small business asset depreciation will also improve under proposed tax reforms announced by the Rudd Government today.
Under the proposed reforms, the company tax rate applied to small businesses will be cut from 30 to 28 per cent rate from the 2012-13 financial year. Cuts for big business, meanwhile, will be phased in, to 29 per cent for the 2013/14 financial year and then to 28 per cent from 2014/15.
The Government hopes small businesses will retain and reinvest the profits flowing from the tax cuts, encouraging growth in what it described as the backbone of the Australian economy. Around 720,000 small businesses are expected to benefit from the measure.
Meanwhile the Government has sought to reduce the administrative burden relating to the depreciation of assets held by small businesses.
Under the existing regime, small businesses must classify the assets they buy into a number of depreciation pools. Only items worth less than $1,000 can be immediately written off, while others must be depreciated at either a 30 or 5 per cent rate depending on the life of the asset (or at half those rates in the year of the purchase of the asset).
The Government is proposing to introduce an instant write off for small business assets worth up to $5,000. Small businesses will also be able to depreciate all other assets (other than buildings) at a rate of 30 per cent.
“These changes will let small businesses write off many assets more quickly, increasing their cash flows at the time when they are investing to grow.”
In announcing the reforms the Government pointed to the greater cash flow difficulties experienced by small businesses compared to their larger counterparts, which can be an impediment to growth and expansion.
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