Budget Comment: “Larger” small businesses win… again
The Treasurer Scott Morrison was right in concluding that the government’s “jobs and growth” 2016-17 Federal Budget isn’t a normal budget.
This Federal Budget represents the first shot fired by the government in the election campaign.
It’s a tough balancing act for the government to provide some vote buying while exercising restraint, given the state of the glob-al economy and the Federal budget not projecting to be in surplus until after 2020.
In the most part, it’s inoffensive, and there are a few sweeteners for most taxpayers without causing any major toothache.
There is welcomed news that the turnover threshold for classifying a “small business entity” will increase from $2 million to $10 million. According to the government, this will allow a further 90,000 to 100,000 businesses to access a range of small business tax concessions, such as the $20,000 instant asset write-off, use of small business pools, and concessional PAYG instalments.
For incorporated small businesses, the 28.5% corporate tax rate from the 2015-16 Federal Budget has been reduced to 27.5%, with eligibility increased to this $10 million threshold. However, by 2026-27 all companies will transition to a rate of 25%.
For unincorporated businesses, the eligibility turnover threshold will increase from $2 million to $5 million to be eligible for the small business tax discount. The offset will be gradually increased from 5% to 16% over the next 10 years but still capped at $1,000 per eligible individual.
Disappointingly, the current $2 million threshold will be retained for access to the highly valuable small business CGT conces-sions.
This undoubtedly creates an administrative headache. Eligible taxpayers and their tax agents will be scratching their heads given that different thresholds apply to different concessions. So much for simplicity!
While corporations have got their wish of lower company tax rates being phased in over the next 10 years, there is a stick how-ever for businesses operating overseas with increased focus on tackling multinational tax avoidance and profit-shifting. Taking cues from Britain, a diverted profits tax (dubbed a “Google tax”) has been resurrected. This was flagged as a possibility in last year’s budget but never made the cut. Further, the Tax Commissioner has also got his wish of increased funding for his war chest with additional specialists.
On the superannuation front, the government has performed a “Robin Hood” by reducing the concessions available to the wealthy in favour of providing incentives to parents and low income earners. This will be achieved by replacing the Low Income Super Contribution scheme with a Low Income Superannuation Tax Offset (LISTO), and measures to allow people who have missed work to raise children or because of illness to make top-up payments when they return to work.
Unsurprisingly, the topics of curtailing negative gearing and the possibility of retracting the “backpacker tax” were both absent.
The battle ground for the upcoming federal election has now been set.
Over to you, Mr Shorten.
Excerpt from Taxpayers Australia