The federal government is so focused on small business because these hardworking men and women are a key source of employment, providing jobs for more than 4.5 million Australians. They are fundamental to our nation’s prosperity.
Along with other measures we have introduced or are currently developing, the package aims to build confidence among small businesses to invest more, create more and grow more.
We want to fire up the economy with more small businesses thriving, purchasing and employing.
In this Budget, our government has taken action where it is affordable and responsible to do so. It has been an honour to craft the package hand-in-hand with industry.
I thank the prime minister, treasurer and finance minister for recognising the potential economic benefits and making room in the Budget for the $5.5 billion package.
One of the key measures is tax relief for small business with an annual turnover of less than $2 million, to stimulate investment and employment.
For more than 90 per cent of incorporated businesses, a 1.5 percentage point tax cut will apply.
This proposal will create a tax system where the whole of a company’s taxable income would be subject to a tax rate of 28.5 per cent if its aggregated turnover is below $2 million; or a 30 per cent rate if its aggregated turnover is equal to or above $2 million.
The maximum amount of franking credits that can be distributed in a given year (the franking credit cap) will remain capped at the same level as for large companies paying 30 per cent tax, allowing small businesses to better distribute surplus credits.
I have been saying for some time that to energise enterprise, we need to support all small businesses. As a result, a 5 per cent tax discount for those which are unincorporated – the other two-thirds operating as sole traders, independent contractors or through partnerships or trust – will provide a boost for the business of up to $1,000 per year.
The discount will apply to individuals who report income from small businesses – that is, those businesses with aggregated turnover below $2 million.
It will be a non-refundable tax offset calculated at 5 per cent of the tax payable on business income, limited to $1,000 per taxpayer, per year. Dividends from companies will not qualify for the discount.
From Budget night until 30 June 2017, small businesses with turnover below $2 million will be able to fully and immediately deduct each and every asset they acquire that is valued up to $20,000 for tax purposes – a substantial increase from the $1,000 threshold.
To provide cash flow to new businesses at the early stage when it is most needed, individuals will be able to deduct certain professional expenses in one year instead of the current five years.
The types of expenses covered include some legal and accounting fees associated with a business start-up, for example the costs of establishing an entity; stamp duty on transfer assets to a new entity; or executing a trust deed.
These measures add to the work we are doing to remove obstacles to crowd-source equity funding to help promote small business access to finance by increasing the availability of innovative sources of funding. From 1 July 2015 expanded tax concessions for employee share schemes will make it easier for small start-up companies to attract and retain the skills and talent they need to grow.
96 per cent of businesses in Australia are small businesses that will directly benefit from this Budget, while all businesses will gain a boost from the government’s broader agenda to “energise enterprise”.
The Abbott Government is committed to ensuring Australia is the best place to start and grow a small business and the Budget package is the stimulus part of our strategy.