Small business is the big winner in the federal budget with measures designed to loosen the purse strings and boost employment.
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The biggest carrot is $20,000 in deductions on purchases for the business – for items like office furniture or machinery – that will come off the tax bill.
There is also a 1.5 per cent tax cut for small companies with less than $2 million annual turnover from July 1, down from 30 per cent to 28.5 per cent.
Non-companies will instead receive a 5 per cent tax break on their taxable income capped at $1000.
Farmers will also benefit from tax deductions for new fences, better water supplies and silos from July 1, 2016.
“Weeks back [Prime Minister] Tony Abbott said to expect a dull and boring budget, so if you’re not in small business there’s little excitement,” Pitcher Partners’ Maitland partner Michael Minter said.
“[But] it will certainly provide a shot in the arm for small business confidence.”
The $20,000 deduction scheme replaces a $1000 cap that has been in place since the last budget.
The generous scheme surpasses even Labor’s popular $6500 cap that was cut last budget.
“This government had scrapped it [$6,500] but it’s back bigger than ever,” Mr Minter said.
The $20,000 deduction is a simpler system approach designed to have immediate affect.
Previously business could only claim purchases as depreciation, at 15 per cent in the first year and 30 per cent in the second year, capped at $1000.
“It will have immediate cash-flow benefits by reducing their tax payable,” Mr Minter said.
“Hopefully it gives the economy some confidence and leads to employment.”
Mr Minter said the 1.5 per cent tax cut for companies up to $2 million
dollars could prove counter productive when business approaches the threshold.
“It doesn’t provide people that incentive to grow their business,” he said.
“Even at 28.5 per cent the Australian tax rate is high by international standards.”