Published on 12/05/2017 by Punchmedia

Budget 2017: How Did Small Business Fair?

Now that the dust has settled on another big budget announcement from the government - we take a look at how it will affect and/or benefit small business moving forward.

For a start, the owners of small businesses will enjoy instant tax offsetsfor another year; a measure the Treasurer says will improve cash flow.

Businesses that turn over less than $10 million each year will be able to immediately write off expenditure up to $20,000.

That's flagged to revert back to $1,000 from July 1, 2018, but there's a possibility it could be extended again.

However, some small businesses may also be hit with a new foreign worker levy.

Every employee on a temporary work visa will cost a business up to $1,800 each year, while businesses will pay a one-off levy for workers on a permanent skilled visa.

Delivering for small businesses

According to the government it is creating the right environment for over three million small businesses across Australia to grow

Some introductions designed to champion small business to date include:

* Cutting small business taxes from 1 July 2016 by reducing the corporate tax rate to its lowest level in 50 years and increasing the unincorporated tax discount rate.

* Supporting small businesses through introducing the instant write-off for eligible assets costing less than $20,000 from 12 May 2015 to 30 June 2017, helping these businesses purchase assets and grow (this is being extended for an additional 12 months in this Budget).

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Increasing the number of businesses eligible for a range of small business tax concessions with the small business turnover threshold being increased from $2 million to $10 million per annum.

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Abolishing $5.8 billion in red tape, saving business owners time to focus on growing their business.

* Amending section 46 of the Competition and Consumer Act 2010 to better prevent the misuse of market power and help level the playing field for small business.

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From 12 November 2016 small businesses will have the unfair contract term protections previously only available to individuals.

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As part of the National Innovation and Science Agenda, creating the Digital Marketplace to make it easier for smaller businesses to compete for the Government's $9 billion information and communication technology (ICT) contracts.

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Requiring government agencies to pay invoices for contracts valued up to $1 million within 30 days or else interest must be paid.

* Opening up new forms of financing for small business by legislating the crowd-sourced equity funding framework for public companies.

* Signing export trade deals with China, Japan and South Korea, which is giving Australian businesses greater access to Asian markets and an expanded consumer base.

* Establishing the Small Business and Family Enterprise Ombudsman to provide a strong voice for small businesses.

Backing small business

According to the government strong small business sector means more jobs for Australians and more opportunities to build vibrant local communities across the country.

Small business makes up 99 per cent of all businesses and contributes $380 billion to the economy - something the government wants to continue to grow.

Easing the tax burden

The Government is committed to reducing the tax burden on small businesses and helping them invest and grow.

Small businesses are reaping the benefits of lower taxation after the Government recently secured tax cuts for around 3.2 million small and medium Australian businesses employing 6.7 million workers as part of its Ten Year Enterprise Tax Plan in the 2016–17 Budget.

These tax cuts begin in 2016–17 for businesses with annual turnover less than $10 million, with the tax rate for companies cut to 27.5 per cent – the lowest level in 50 years. Unincorporated businesses with annual turnover of less than $5 million also benefit from an increase in the rate of the unincorporated tax discount to 8 per cent.

This delivers on tax cuts for small and medium businesses with annual turnover less than $50 million promised for this term of Government in the last Budget.

Over 90,000 additional businesses will gain access to the small business tax concessions as a result of the small business turnover threshold being increased to $10 million per annum.

Further expanding on these small business initiatives, in this Budget the Government will extend the $20,000 instant asset write-off for a further 12 months to 30 June 2018. The turnover threshold will also be lifted to $10 million, five times higher than was originally available.

This measure will improve cash flow for small business, providing a boost to small business activity for another year, helping them to reinvest in their business and replace or upgrade their assets.

The government believes improved cash flow will also give businesses the flexibility to hire more employees and pay staff more.

CASE STUDY

How tax reform helps small business

Justin owns and operates a carpentry company from three premises employing 10 people. His business has an annual turnover of $7 million and taxable income of $400,000 (excluding deductions for asset purchases). On 1 June 2017, Justin's company purchases a panel saw costing $7,000, an edge bander for $10,000 and a belt sander for $14,000 (all exclusive of GST) for one of his three premises. On 1 January 2018, his company purchases another panel saw, edge bander and belt sander (at the same prices) for each of his remaining two premises.

Prior to the Ten Year Enterprise Tax Plan, Justin's company paid tax at the 30 per cent company tax rate and was not able to access a range of small business tax concessions.

After passage of tax cuts as part of the Ten Year Enterprise Tax Plan

As a result of the Ten Year Enterprise Tax Plan announced in the 2016–17 Budget, Justin's company pays tax at the lower 27.5 per cent tax rate. Justin's company is now also an eligible small business as it has annual turnover below the increased $10 million turnover threshold and his company can now access a range of small business tax concessions, including the instant asset write-off for assets costing less than $20,000.

2017–18 Budget – Extended $20,000 instant asset write-off

With the $20,000 instant asset write-off being extended for a further 12 months in the 2017–18 Budget, Justin's company can continue to immediately deduct assets for his carpentry business that are each valued at less than $20,000 until 30 June 2018.

Impact of the Government's changes

Justin's company will receive an additional cash flow benefit of around $18,300 in 2016–17 as a result of the lower company tax rate and access to the instant asset write-off. As a result of the 2017–18 Budget measure to extend the $20,000 instant asset write-off, his company will also be around $14,500 better off in 2017–18.

Justin can use the additional cash flow benefit in each of these years to reinvest in and grow his company.

punchmedia

Curtis is a leading expert in the business-for-sale industry, serving as a senior content creator at anybusiness.com.au.

With a career spanning over fifteen years, Curtis has accumulated extensive knowledge in the domain of business sales, acquisitions, and valuations. His deep understanding of market dynamics and his ability to translate complex industry jargon into accessible insights make him a trusted resource for entrepreneurs and business owners looking to buy or sell businesses.

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