Deficits are inevitable and Kevin Rudd’s intent to get the Australia economy back to surplus by 2013 (three years ahead of time) is ambitious but admirable. In the Budget announcement last night all the big issues were reaffirmed as per my post on the Henry Review last week.
The Rudd Government will look to reduce the rate of increase in government spending as Australia works it way out of the global financial crisis. Any restrictions on government spending will push more employees into the commercial sector, which should see new businesses emerge as some turn to self-employment. SMEs who provide goods and services to the Rudd Government will also see their position tighten. But if the economy as a whole grows, then in theory, the SME will be able to move their business from government to other sectors.
Australian Budget expenses
Lowering the SME tax to 28% (from 30%) is good news for small businesses which make a huge contribution to GDP. While it is praiseworthy to want to ensure people retain a comfortable lifestyle in their twilight years, the rise in the super guarantee means business owners will have to increase their employer contributions. This adds to the underlying costs of our friendly small business and makes life harder financially. So, the Government gives with one hand and takes with the other.
Australian Budget revenues
The big problem Treasurer Wayne Swan and Kevin Rudd have is getting the Resource Super Profits Tax (RSPT) on mining through the Senate where they do not have a majority. Being a ‘no frills’ Budget there is not a lot of wriggle room to negotiate. The RSPT is such a significant feature of the Budget, that if it does not go through, then Rudd may need to go back to the drawing board. Uncertainty hurts any economy. Australia we need a decision soon.
What it means for small business
- Reduction in corporate tax rate to 28% effective from 2012/2013 FY
- Write off Assets up to $5k in the year of purchase from 1/7/2012 and a simpler single pool rate of depreciation of 30% (buildings)
- Superannuation Guarantee (SGC) increase to 12% by 2019 (0.25% increment from 2013 to 2014 and 0.5% annually from 2015 to 2019)
- Establishing a single online business name register will save businesses money as they currently register (and pay) state by state. This was announced initially in 2009. No definitive date for roll out announced
- If you report GST on a Cash Basis you will be able to claim upfront credits for GST on HP agreements
- Government will target the cash economy and fraudulent/skipped BAS returns, compliance in general – in line with this it will also invest in simplifying compliance costs to business