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April 18, 2017

by Saeed Mirzakhani, Partner

More than three million small Australian businesses now have a lower tax rate. Is yours one of them?

Last year, Prime Minister Malcolm Turnbull’s “jobs and growth” catchphrase was inescapable. At the heart of Turnbull’s 2016-17 budget was the Ten Year Enterprise Tax Plan, designed to (yep, you guessed it) support jobs and growth. There’s been times during the last year where it looked like no part of the Plan was going to get up, but thankfully, the Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016 – comprising tax rate cuts for businesses – was passed by the Senate late last month.

I own a small business, what do these new cuts mean for me?

 

Under this new arrangement, more than three million small Australian businesses will now have a lower tax rate – supporting you to grow your business in a sustainable way.

The amendments see businesses with a turnover of less than $10 million get a reduction in their tax rate to 27.5 per cent this financial year (down from 28.5 per cent). And, over the next ten years, the company tax rate will drop to 25 per cent for businesses with an aggregated turnover of less than $50 million.

This Bill also increases the small business entity turnover threshold. So, businesses with a turnover of less than $10 million will now be able to access a range of concessions that were previously only available to those businesses with a turnover of less than $2 million.

Other concessions documented in the Ten Year Enterprise Tax Plan include:

  • Simplified depreciation rules
  • Simplified trading stock rules
  • A more streamlined method of paying PAYG instalments
  • The option to account for GST on a cash basis and pay GST instalments as calculated by the ATO.

Are these changes a good thing?

 

Yes, we deem they are. But, here at CharterNet, we also believe there’s always room for improvement. And, this Bill is no different. While we welcome the tax cuts the amendments afford, there’s still more to be done to give small and medium-sized businesses the support they deserve.

However, the great news is that the savings these tax cuts provide can be reinvested back into the business. This can mean affording new technologies, having access to more professional development opportunities or being able to resource more R&D activities.

When do these changes come into play?

 

As suggested by its name, the Ten Year Enterprise Tax Plan is designed to roll out a succession of cuts to corporate tax rates over the next ten years. From this financial year, businesses with annual turnover of up to $10 million will have their tax rate lowered to 27.5 per cent. This will then drop to 27 per cent by 2024-25, and to 25 per cent by 2026-27.

From 1 July 2017, companies with a turnover of up to $25 million will get the 2.5 per cent reduction to 27.5 per cent, with the drop then applying to businesses under $50 million in the 2018-2019 financial year.

Need more info?

 

Please get in touch to find out more information and learn how the changes apply to you.

Own a small business? Find more out more about the government’s range of support measures here.

* While the Bill was passed with government amendments by the Senate on 31 March 2017, the amended Bill is expected to be re-introduced into the House of Representatives for passage in early May 2017.