Mixed reviews for Henry Tax Review Reforms

04.05.10

The long awaited Henry Tax Review reforms have received mixed reviews from relevant stakeholders since their release on Sunday. Responses to the Rudd Government announcements have ranged from strong opposition to enthusiastic support each supported by various proof points. But with such vastly opposing opinions how do small business owners work out what the review will mean for them?

The general message in relation to the reform however is simply that the changes are not straight forward and will indeed require further clarification before anyone can definitively claim that they are either positive or negative.

Under the reforms the Government will introduce instant write off for small business assets worth up to $5,000. This means many small business investments will be able to be written off in the year of purchase. Small businesses will also be able to depreciate all other assets (other than buildings) in a single pool, at a rate of 30 per cent.

Small businesses currently have to keep a range of records and classify the assets they buy into a number of depreciation 'pools'. Small items worth less than $1,000 can be immediately written off and others allocated to one of two depreciation 'pools' which are depreciated at either a 30 or 5 per cent rate depending on the life of the asset (half these rates in the year of purchase).

The other key change impacting small business is a head start in the cut to the company tax rate. Small businesses will move straight to the new 28 per cent rate from the 2012-13 income year.

In less than three days since the announcement various interest groups have gone public with their thoughts on how the Tax Review will impact Australian small businesses. 

A few key examples include:

  • Small business is expected to cop a $26.6 billion increase in costs as a result of the Henry Tax Review due to increases in the compulsory superannuation rate says Bruce Billson Shadow Minister for Small Business, Deregulation, Competition Policy and Sustainable Cities.
  • "The Henry Tax Review signals big returns for small businesses, with cuts to company tax and long overdue changes to depreciation write off thresholds," says Council of Small Business of Australia (COSBOA) CEO Jaye Radisich.
  • The Australian Chamber of Commerce and Industry (ACCI) said yesterday all small businesses would be slugged by an increase in superannuation contributions from 9 per cent to 12 per cent.
  • Australian Retail Association (ARA) Executive Director Russell Zimmerman says, "Any small relief from the two percent reduction in company tax for small business will be offset by the three percent increase in employer superannuation contributions."

All business owners should check with their business advisor, read any relevant research, establish Google alerts, talk to their relevant industry body - and generally study the response in more detail before reaching ultimate conclusions. Each individual business will have a variety of factors that will ultimately impact their business and it is important to understand and be able to respond to those changes as quickly as possible.

For further information on the proposed reforms visit the Government website at http://www.futuretax.gov.au/pages/default.aspx

 

 

 

 

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