The Australian government’s most recent budget has been well received by thousands of small business owners. With a focus on changing revenue, the new budget gives business owners a tax cut in 2010. They will also enjoy an immediate increase in their respective depreciation arrangements. These small business tax cuts will work to boost Australia’s ailing economy.
Benefits to Small Businesses
Many small business owners are feeling the effects harshly of the economic recession. The new budget’s small business tax cuts will decrease tax rates by 2 percent in the 2012-2013 economic year.
This decrease from 30% to 28% taxes means that small businesses can pocket the margin that they save. That money can then be re-invested to help their businesses flourish. Estimates made by the Australian government project that these changes will aid two and a half million businesses by simplifying depreciation.
Until now, business owners were given a write-off limit of $1000. These proposed tax changes in 2012 will allow small businesses to make write-offs of up to $5000, which is a huge and significant leap.
In fact, the entire depreciation system is being made far more simple because businesses will now be allowed to write off many different assets in a single pool with a consistent 30% rate.
For now, these changes will target small businesses, but eventually the same tax cuts will be made available to larger businesses as well. Their tax rates will fall from 30% to 29% in 2013, and then decrease by another 1 percent the following tax year.
What’s the Catch?
If you are conditioned to view budget changes with a grain of salt, you are likely wondering how these tax cuts are paid for. The Australian government is ready with an answer: the Resource Super Profits Tax, or RSPT.
They say that it will boost the economy by raising the overall national savings. Treasurer Wayne Swan has stated that RSPT will be effective in getting Australia a decent return on its resources. These include coal and iron ore.
Mining companies disagree, and are engaged in dialogue with the Treasurer with the aim of fighting RSPT, or at the very least reducing it. These parties feel that the new tax will cause them to lose a great deal of planned investment.
Predicted Benefits
When paired with this mining tax, the newly proposed Australian small business tax cuts to come into effect in 2010 are estimated to boost the economy by anywhere from 0.7 to 1.1 percent. Swan says that every full-time Australian citizen will pocket an extra $450 a year as a result of these tax changes.
