MYOB has congratulated the federal government on recognising the power of SMEs in driving the Australian economy, but CEO Tim Reed warned many SMEs need these changes now, not in 10 years’ time when some of them may not even be around to benefit from it.
As part of a small business package, the government will reduce some SMEs' tax rate to 27.5 per cent, starting with businesses with a turnover of less than $10 million on 1 July this year. This, according to the budget papers, will deliver a lower tax rate for around 870,000 companies that employ more than 3.4 million workers.
In addition, the government will reduce the tax rate on all companies to 25 per cent by 2026-27. The government will also extend the unincorporated small business tax discount. From 2016-17, the discount will be available to businesses with an annual turnover of less than $5 million, up from the current threshold of $2 million, and will be increased to eight per cent. The maximum discount available will remain at $1,000.
Over the next decade, the discount will be further expanded in phases, to a final discount of 16 per cent.
Access to a number of tax concessions will also be provided by increasing the threshold for these concessions to $10 million, up from the current $2 million threshold. These changes will benefit more than 90,000 businesses.
Overall, Mr Reed rated the budget very highly for its support of the SME sector.
“The government’s economic plan deserves a 9/10 for respecting the vital role SMEs play in the Australian economy,” he said, before congratulating the government on its action around GST compliance.
“Simplifying GST compliance has been a high priority for businesses for over a decade now so we heartily congratulate the government for announcing a trial to streamline the process. This is something we’ve been lobbying the government about for years; it is great to see this is a government that listens to and responds to requests from small business.” said Mr Reed.
“Reducing the 'G-Codes' or 'tags' on the BAS from seven to three as part of that trial is a great step forward.”
However, Mr Reed did criticise the government for its lack of conviction around holistic reform.
“If the government had the conviction to fully address the GST issue once for all in this budget, MYOB would have given it a 10/10, but we knew some time ago the government had no appetite to broaden the base of the GST – that is the only way to truly make it simpler for small business owners,” he said.
Mid-tier firm BDO also lamented the lack of conviction around tax reform.
“A year ago there was a lot of optimism that this budget might begin the process of genuine tax reform, but political expediency has reduced it to more tinkering at the edges,” BDO tax partner Mark Molesworth said.
“This is very much a budget from a government whose first, second and third priorities are to get re-elected," he added.
From 1 July 2016 all businesses with annual turnover of less than $10 million will have access to:
• simplified depreciation rules, including immediate tax deductibility for asset purchases costing less than $20,000 until 30 June 2017;
• simplified trading stock rules, giving them the option to avoid end of year stocktake if the value of their stock has changed by less than $5,000;
• a simplified method of paying PAYG instalments calculated by the ATO, which removes the risk of under or over estimating PAYG instalments and the resulting penalties that may be applied;
• the option to account for GST on a cash basis and pay GST instalments as calculated by the ATO;
• other tax concessions currently available to small businesses, such as fringe benefits tax (FBT) exemptions (from 1 April 2017 to align with the FBT year); and
• a trial of simpler business activity statements (BAS), reducing GST compliance costs, with a full roll-out from 1 July 2017.