Team Turnbull / Morrison has lifted the bonnet to fine tune the “engine room” of the economy to encourage small business to invest and employ. In a welcomed move, the Budget announced that effective from 1 July 2016 small businesses will receive a reduction in the company tax rate to 27.5%.
A further “turbo boost” to small businesses has seen the annual turnover threshold increase to $10 million. Currently the Government defines small businesses as having an annual turnover threshold of $2 million or less. This has another intended impact in that with the increase of the small business annual turnover threshold, more businesses will become eligible to apply the $20,000 immediate asset write off / deduction.
The fine tuning didn’t stop there, with an announcement that the lower company tax rate of 27.5% will be progressively introduced to apply to all businesses by 2023-24. And there was more. The green light was given to a clear pathway to a 5% reduction in the corporate tax cut over 10 years. This means that by 2026-27 the company tax rate will be reduced to 25% with the aim of making Australian businesses more internationally competitive.
The progressive phase in of the reduced company tax rate and application to all companies is viewed as a sensible and realistic way of providing meaningful tax cuts to business whilst working towards a budget surplus.
You could call this a turbo / supercharged engine. It is estimated that this measure would affect up to 870,000 businesses and 3.4 million workers. That could add some serious grunt to the engine room of the economy.
