Australian Prime Minister Tony Abbott says small business is “the vital beating heart of a strong economy”.
The Australian Government is promising a package of tax cuts, investment incentives, productivity enhancing measures and less red tape. But will this be enough to kick-start the economy?
The measures introduced for small businesses include:
- 5% cut in company tax from 30% to 28.5% for incorporated small businesses
- 5% tax discount for unincorporated businesses up to $1,000 per year
- An immediate tax deduction for any individual asset costing less than $20,000
- Changes to the tax treatment of employee share schemes
- Ability to change business structures tax-free
- Fringe benefits tax exemption for portable electronic devices.
- Legal and accounting services can be significant costs for businesses that are setting up. New businesses can now immediately claim these costs as tax deductions in full.
Any tax relief is welcome, but the government needs to embrace a more ambitious and comprehensive reform agenda to transform the commercial environment.
While the government has been cutting jobs and pulling back spending, the RBA has sliced the official cash rate to a multi-decade low of 2%. The Reserve Bank of Australia and the Australian treasury have downgraded near-term growth forecasts – the RBA does not expect activity to pick up significantly until late next year – and the International Monetary Fund has warned the world risks becoming mired in persistent lacklustre growth without a major effort by policymakers.
In ordinary times, such low interest rates would result in a borrowing binge by firms. But when conditions are as subdued as they are now, cheap finance counts for little when business owners can see little reason to upgrade and expand. In the absence of major changes, observers believe any budget boost to the mood of small business is likely to be short-lived.
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Reference : http://intheblack.com/articles/2015/04/29/what-the-2015-federal-budget-means-for-your-small-business, By Adrian Rollins