BUDGET: SMEs granted car deductions, cashflow benefits

Government pledges two major initiatives to support small business while promising to deliver a surplus in 2012-13

BUDGET: SMEs granted car deductions, cashflow benefits
<b><font color=red>BUDGET:</b></font> SMEs granted car deductions, cashflow benefits
By Jayne Munday | May 11, 2011

The Gillard Government has pledged two major initiatives to support small business in this year’s budget while promising to deliver a surplus in 2012-13.

Confirming an announcement made by the Government earlier this week, the 2011-12 Federal Budget will provide small businesses with a $5,000 immediate write-off for cars purchased from 2012-13.

Businesses will also gain cash flow benefits from a reduction in the GDP adjustment factor (from 8 percent to 4 percent) for PAYG instalment taxpayers who use the GDP adjustment method.

This particular measure also smooths the transition from the two percent GDP adjustment that has applied for the last two years as the economy recovered from the GFC.

Other workforce-related Budget priorities announced overnight include a $3 billion Building Australia’s Future Workforce package.

Aimed at boosting participation, it includes $558 million to establish a new National Workforce Development fund and $101 million to improve apprenticeship completions.

A further $233 million will go towards getting the long-term unemployed back into the workforce and low-paid workers will be better off, with $300 a year of the Low Income Tax Offset to go into pay packets from July.

As outlined in this year’s Budget, the Government’s $22.6 billion black hole will return to a surplus of $3.5 billion in 2012-13 despite the impact of recent natural disasters.

Following 2.25 percent growth in 2010-11, real GDP growth is forecast to increase to 4 percent in 2011-12 and 3.75 percent in 2012-13.

The unemployment rate is forecast to fall from around 5 percent currently to 4.75 percent in late 2011-12 and 4.5 percent in late 2012-13.

While this year’s Federal Budget is solid on the fundamentals of skills and infrastructure, the Australian Industry Group argues more could have been done to improve business capabilities and exporting.

Ai Group CEO Heather Ridout says it is "disappointing" that little has been done by the way of programs to address the lopsided nature of the economy by investing in innovation.

"The Budget did not introduce welcome measures aimed at improving domestic participation in major resource sector projects for manufacturers and Ai Group will work closely with the Government in the detailed design of those measures," Ridout says.

Despite her concerns, Ridout has welcomed the establishment of a National Workforce and Productivity Agency; renewed investment in workforce skills, literacy and apprenticeships; and new investments in transport infrastructure.

"All up, this substantial package, which delivers a significant new investment over a sustained period, will stand Australia in good stead in the years ahead," Ridout says.

"The small business measures specifically, the $5,000 immediate write-off of cars from 2012-13, which comes on top of previously-announced measures for small business, and the adjustment for Pay As You Go instalments in 2011-12, are both welcome," she says.

However, she suggests that the threshold of $2 million turnover for the car write-off measures should be increased in line with the recommendations of the Henry Review.

Similar to the Ai Group, the Australian Chamber of Commerce and Industry (ACCI) has had a mixed response to the Budget.

The ACCI says while the investment in workforce skills, skilled migration and workforce participation is wise, small business will feel "short changed".

"The extra depreciation on capital purchase of new vehicles is good but change in fringe benefits on motor vehicles could be counterproductive," CEO Peter Anderson says.

"There is no real relief on business costs, red tape or compliance," he says.

However, Anderson says the Building Australia’s Future Workforce initiatives are to be applauded.

"Similarly improvements to encourage infrastructure investment and promote transparency through published cost benefit analyses are timely."

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