Budget 2016: Federal government unveils 10-year enterprise tax plan
- 03 May, 2016 21:07
The Federal government has launched a growth friendly, 10-year enterprise tax plan in an attempt to boost investment, create and support jobs, and increase wages starting with tax cuts and incentives for SMEs.
“SMBs are driving jobs growth in Australia and must continue to do so. They are also overwhelmingly Australian owned and more likely to reinvest their earnings in future growth, as they seek to build their businesses,” treasurer Scott Morrison, said.
“A tax on their businesses is a tax on their enterprise and the jobs they provide. That is why last year, we announced a 1.5 percentage point reduction in the tax rate for small businesses with a turnover of less than $2 million per year.
“Tonight we go further and share the ambition for smaller businesses to become bigger businesses,” he added.
As such, from July 1, the small business tax rate will be lowered to 27.5 per cent and the turnover threshold for small businesses able to access it will be increased from $2 million to $10 million.
“This means businesses with a turnover of less than $10 million will also be able to access other tax incentives, including the small business depreciation pooling provisions, simplified trading stock rules, and Pay-As-You-Go Instalments payments option.”
The Federal government will also increase the unincorporated small business tax discount to eight per cent and extend the threshold from a turnover of $2 million to less than $5 million.
In addition, it intends to extend access to instant write off for equipment purchases of up to $20,000 that will expire on June 30 next year, to businesses with a turnover of less than $10 million.
“But we don't want these businesses to stop there. Each year we will continue to step up the turnover threshold for access to the lower company tax rate of 27.5 per cent for more businesses, from $10 million to $25 million in 2017-18, to $50 million in 2018-19 and $100 million in 2019-20.
“This will mean by 2020, more than half of all employees of companies in Australia will be in companies paying a lower tax rate of 27.5 per cent,” Morrison said.
Phase two of the 10-year enterprise tax plan will see the extension of the lower tax rate of 27.5 per cent to all businesses, by continuing to step up the threshold each year until 2023-24, before reducing the 27.5 per cent rate for all businesses to 25 per cent at the end of ten years in 2026-27.