Tax cuts and instant asset write-offs will help put small businesses back on the track to recovery, while super changes may have an adverse effect on employers
By Jayne Munday | May 13, 2010
Tax cuts and instant asset write-offs will help put
small businesses back on the track to recovery, while superannuation changes may have an adverse effect on employers.
This was the take home message from this morning’s budget briefing at Brisbane’s Sebel & Citigate held by leading advisory firm BDO.
Partner of BDO’s Queensland tax division, Brian Richards, addressed the 350-strong crowd on Budget issues likely to impact on business and personal affairs.
With the Rudd Government promising to return to a Budget surplus in 2012-13, Richards assures there is “good news” for both the economy and business.
“We can go out and spend more money on plant and equipment. We can employ more people, embark upon more business prospects,” he says. “Everything is pretty good.”
BUDGET ‘WINNERS’
According to BDO, the ‘winners’ of Treasurer Wayne Swan’s Budget are Australian companies and small business.
This is due to a number of provisions announced earlier this week, including: cutting the company tax rate, instant asset write-offs for small business, GST revision, new Centre for International Finance and Regulation, and a phase down of interest withholding tax to promote the corporate bond market.
“The ability to instantly write-off capital assets costing up to $5,000 is of great benefit,” Richards says.
Yet when it comes to a reduction in the company tax rate, he is less enthusiastic.
“Henry suggested 25 percent…the government said 28-29 percent progressively over the next couple of years,” Richards explains.
“When it comes to the small business company tax rate, not many small businesses actually trade through a company,” he says. “It sounds good, but it’s not good.”
Despite his reservations, Richards admits some of the proposed tax relief will be welcomed by those affected.
“Certainly the reduction in the company tax rate is of benefit and puts us in a globally competitive environment,” he adds.
BUDGET ‘LOSERS’
In terms of Budget ‘losers’, BDO says the proposed superannuation guarantee will sting employers.
The Government is set to increase the superannuation guarantee rate from 9 percent to 12 percent, with increments of 0.25 percent points in the first two years, and 0.5 percent points thereafter.
This will be phased in from July 1, 2013 to July 1, 2019
“If it was going from 9 to 12 percent in one hit there would be some compromise between employees contributing and employers contributing,” Richards says.
“But employers will effectively be contributing to the increase in addition to normal pay requirements,” he says of the compulsory payments.
When it comes to extra taxes, Australia’s mining companies are set to experience the biggest setback.
The government’s surplus goal hinges on the resources ‘super tax’, which will see big miners hit with a 40 percent levy.
“Much of the Budget is contingent on the Resource Super Profits Tax,” BDO says in its ‘Federal Budget – the 2010 Cornerstone?’ information booklet.
Considering the Budget is also dependent on a sizeable increase in revenue of 7 percent ($100 billion), the advisory firm questions the viability of Swan’s approach.
“Ferocious opposition form mining companies, the Federal Opposition and several state governments may douse Wayne Swan’s Budget fire before it has its desired impact,” BDO says.