Small Business Company Tax Rate Cut - Henry Tax Review
- Arnold Shields
- May 2, 2010
- 2 min read
Updated: Jun 20
Overview
The Treasurer, Wayne Swan, has announced sweeping changes to Australia’s tax system in response to the Henry Review. These reforms are aimed at easing compliance and encouraging investment among small businesses. However, it's important to note that these announcements are not yet law and will be subject to the legislative process.
Key Changes for Small Businesses
✅ Company Tax Rate Cut to 28% from 1 July 2012
In a welcome move for small businesses, the company tax rate will reduce from 30% to 28%, two years earlier than for larger businesses. It’s expected that eligibility will be defined using the current turnover threshold of less than $2 million.
✅ Instant Asset Write-Off Increased to $5,000
From 1 July 2012, small businesses will be able to claim a full deduction for assets costing less than $5,000.This move is designed to boost investment in essential business equipment. We anticipate many businesses will delay mid-range asset purchases until the new rule applies, leading to heightened competition post-July.
✅ Single Depreciation Pool at 30%
Currently, depreciation rules can be complex and administratively burdensome. This reform introduces a simplified single pool (excluding buildings) with a flat 30% depreciation rate.While this helps align tax with cashflow, it may distort reported profit and asset values in financial statements used for lending or investor purposes.
✅ Superannuation Guarantee Rising to 12%
The compulsory superannuation contribution rate will increase from 9% to 12% between 1 July 2013 and 1 July 2019.This will be phased in as follows:
9.25% in 2013/2014
9.5% in 2014/2015
Increasing by 0.5% annually until reaching 12% in 2019/2020
Employers should begin preparing for the additional wage costs now. Whether future wage negotiations will absorb these increases remains to be seen.
Final Thoughts
These reforms have the potential to improve the viability and growth potential of small businesses across Australia. However, timing your asset purchases and understanding the long-term impact of increased super obligations will be crucial.
We’d love to hear your thoughts, leave a comment below or get in touch with us at Dolman Bateman to discuss how these changes could affect your business.
Disclaimer:
The information provided in this article is general in nature and does not constitute personal financial, legal or tax advice. While every effort has been made to ensure the accuracy of this content at the time of publication, tax laws and regulations may change, and individual circumstances vary. Dolman Bateman accepts no responsibility or liability for any loss or damage incurred as a result of acting on or relying upon any of the information contained herein. You should seek professional advice tailored to your specific situation before making any financial or tax decision.
