Image source: Scott Morrison MP official Facebook page

There’s never been a better time to be a small business owner

We’re not supposed to talk about this year’s budget in terms of ‘winners and losers’ according to Federal Treasurer, Scott Morrison. “Australians have moved on from that” he said in a pre-budget speech. But while today’s headlines will show that this idea is far removed from reality, what is true, is that this year’s biggest ‘losers’ will struggle for a voice in the public domain. Introducing tax hikes for smokers and the targeting of tax avoiding multinationals to increase revenues are hardly changes that will arouse sympathy – not least when these moves translate into tax cuts for small business and jobs for young job seekers. Winners and losers.

Described by Morrison in his announcement as an “economic plan” and not “just another budget,” small businesses will pay a lower tax rate of 27.5 per cent from the first of July, while the revenue threshold for eligibility will be increased from $2 million to $10 million.

Anticipated to stimulate the transition from a mining investment driven economy to one founded on innovation and enterprise, Morrison said “this will mean 870,000 businesses, employing 3.4 million Australians, will have their tax rate reduced.”  

At the same time, tax breaks for equipment purchases up to $20,000 will remain in place for a further year and will become accessible to businesses with a turnover of less than $10 million. The unincorporated small business tax discount will also be increased to 8 per cent, accessible to businesses with a turnover of $5 million. As part of a wider 10-year ‘enterprise tax plan’, Morrison said the tax rate for all businesses will be reduced to 25 per cent by 2026.

“A tax on their businesses is a tax on their enterprise and the jobs they provide,” said Morrison.

“Tonight we go further and share the ambition for smaller businesses to become bigger businesses.

“Australians know that our future depends on how well we continue to grow and shape our economy.”

These changes are hardly a surprise in the wake of ongoing rhetoric about the necessity to kick the Australian economy into touch – they appear to hit all the right notes for our nation’s entrepreneurial minds. Launched in December last year, the National Innovation and Science Agenda which aims to encourage new business through ideas generation is testament to the wider objectives at play. This too will bring tax incentives to investors who support innovative start-ups, also effective from July 2016.

In a pre-budget interview, Morrison said “what Australia needs at this very sensitive time in our economic transition is a national plan for jobs and growth that will reassure every Australian about the path we're on to make our way through this transition.”    

During the announcement he said “Australians know that our future depends on how well we continue to grow and shape our economy as we transition from the unprecedented mining investment boom to a stronger, more diverse, new economy.

“We will not be able to rely on our natural advantages in resources to secure the jobs of the future like we have in the past,” he said.

Small business advocate and CEO of MYOB, one of Australia’s leading accounting software providers, Tim Reed, has congratulated the Federal Government on recognising the power of SMEs in driving the Australian economy.

“It’s like SMEs have been given a terrific present but told it is coming in pieces and they can’t open it up for a decade.”

“The Government’s economic plan deserves 9 out of 10 for respecting the vital role SMEs play in the Australian economy,” he said.

“This is the second year in a row where small and medium businesses have been recognised and put front and center in the budget.”

But while congratulating the changes, Reed questions whether they are bold enough and coming fast enough.

“The plan to cut the company tax rate to 25 per cent is an excellent one however the timeline could and should be shortened,” said Reed.

“It’s like SMEs have been given a terrific present but told it is coming in pieces and they can’t open it up for a decade.”

Further, while welcoming the move to widen the eligibility and extend the $20,000 tax write-off, Reed says that this should be made a permanent feature to better support the economy.  

It is the age of the small business. The government recognises that today’s university leavers are looking beyond the confines of employment to the real possibility of starting their own ventures – and our future economy depends on this. In case you haven’t already gathered, the goal is “jobs and growth.” But is the government going far enough and moving quickly enough? There’s always room for improvement, but perhaps that’s an answer only time can provide.

Dan Jacobs

Dan Jacobs is the Editor for ShortPress and an experienced business writer across a range of industry sectors.  

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