Will smaller firms benefit?
I READ an article in the Australian Financial Review last week headed “Small business wins tax write-off”.
Woo hoo, I thought. Finally something for small biz. Don’t count your chickens.
On further reading, what the budget actually says is that now I can claim up to $5000 instant tax write-off on capital purchases including cars purchased between 2012 and 2013.
Um. I don’t need a car but thanks anyway.
To fund the deduction, our treasurer has decided to cut the Entrepreneurs Tax Offset (ETO), which gave micro-businesses an automatic tax rebate of up to $2750.
Your accountants would have been all over this each year when they did your tax return.
The maximum refund amount ($2750) is available when your total business income is less than $50,000.
As your business income increases, the refund decreases cutting out at $75,000.
The ETO therefore benefited a large number of self-employed Australians, mostly independent contractors. More than 402,000 micro-businesses claimed that deduction in 2008-09.
Under this new benefit, a tradie for example will need to spend $33,960 on a new ute to receive a tax benefit of just $1275. So he has to spend big in order to receive relatively little.
Under the ETO that same tradie could receive the tax rebate of up to $2750, depending on his income.
It’s been argued that the ETO benefited only a small proportion of small businesses but abolishing it now provides a disincentive for people to start businesses as it helped those people get a kick along. It also helped a large proportion of Australia’s small business sector – the micro-businesses and non-employing business – every year, not just when they had the money for large capital outlay.
“Small business is very much in the forefront of our thoughts”, Treasurer Wayne Swan said.
Maybe not so much small business as business that can afford large capital purchases.
(Lyn Prowse-Bishop has been running her virtual assistant practice since 2000 with a global client base. She is Qld representative on the Board of Independent Contractors Australia and host of podcast The Virtual Business Show. Find out more at http://www.execstress.com)