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Federal Budget 2019: Expanded tax breaks for Australia’s small, medium businesses

Written by Clancy Yeates / The Age / 2 April 2019

Thousands of small and medium businesses will receive tax breaks on purchases of new equipment, as the government seeks to bolster investment in the economy’s “engine room”.

In a budget that also highlighted future tax cuts for small businesses, Treasurer Josh Frydenberg expanded the instant asset write-off, so that it can now be claimed by medium businesses with turnover up to $50 million a year, up from a previous $10 million limit.

The threshold for the tax perk — which allows businesses to write off assets against their taxable income — is also being lifted, from $25,000 per asset to $30,000.

The government said the changes, projected to cost the budget $400 million over four years, will mean an extra 22,000 businesses are able to claim the tax break.

Mr Frydenberg said the write-off could be claimed every time a business bought an eligible asset worth less than $30,000, such as when a plumber bought new tools, or a cafe owner purchased a fridge.

“Small businesses are the engine room of our economy,” he said in his budget speech.

“They are integral to every local community. People running a small business put their livelihoods on the line. We want small businesses to prosper, and we are backing them to do so.”

Under one case study presented by the government, a hypothetical nursery employing five people would be able to write off the purchase of two vans under the scheme, instead of depreciating the assets. As a result, the business would save on tax and improve its cash flow by $13,500. A hypothetical business with 60 staff could boost its cash flow by $30,800 by buying 10 commercial ovens, a budget document says.

As a result of the changes, the government says a total of 3.4 million small and medium businesses will now be eligible for the tax perk.

Budget documents also highlighted that the corporate tax rate for companies with annual turnover of less than $50 million will fall from 27.5 per cent this year, to 26 per cent in 2020-12, and 25 per cent in 2012-22.

Businesses are also being offered larger cash payments for taking on apprentices where there are skills shortage, the centrepiece of a $525 million skills package, but the budget had a tougher message for some larger businesses, such as banks and multinational corporations.

After the Hayne royal commission exposed a series of rip-offs by financial institutions, there was an extra $607 million to fund the government’s response to the inquiry, as announced last month.

This included an extra $405 million for the Australian Securities and Investments Commission, which has pledged to be more aggressive in taking companies and individuals to court, after it was criticised for being too lenient. The Australian Prudential Regulation Authority will receive an extra $145 million for priority areas such as improving governance and remuneration practices in banks. There will also be extra funding to resolve past disputes between customers and banks. The extra spending will be partially funded by higher levies to be imposed by regulators on the financial sector, the budget said.

The budget is also expected to raise an extra $3.6 billion in revenue over four years by extending a tax crackdown on multinationals and the very wealthy.

The Australian Taxation Office will receive an extra $1 billion over four years to expand a tax avoidance taskforce that targets multinational businesses, large companies, trusts and “high wealth” individuals.

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