BUSINESS is at the forefront of the 2016 federal budget, with SMEs set to see their company tax rate fall to 27.5 per cent from July 1 this year.
Treasurer Scott Morrison announced the company tax break in his first budget overnight, a further 1 percentage point reduction for small businesses with annual turnover less than $2 million.
Meanwhile, eligibility for the new tax rate has been increased to capture companies with a turnover of up to $10 million.
The Government has also highlighted its intention to lower corporate tax across the board.
The threshold for the 27.5 per cent tax rate is expected to rise to $25 million at the beginning of July 2017, to $50 million before the end of 2019 and $100 million before the end of 2020.
The Government plans to lower the corporate tax rate to 25 per cent for all businesses in 2026-2027 if still in power.
"This will significantly increase the attractiveness of investment into Australia and make Australian companies more internationally competitive in a tough global marketplace," says Morrison.
"This will also mean higher living standards for Australians and an expected permanent increase in the size of the economy of just over one percent in the long term."
Retail Council chairman Peter Birtles says there is little in the Federal Budget to spook consumers and business can be buoyed by a commitment to set a clear path to long-term growth.
He says personal income tax cuts and company tax cuts for small and medium businesses announced should help business conditions and stimulate economic activity.
"We are encouraged by the Government's commitment to reduce the company tax rate for all businesses," says Birtles.
"However, we are disappointed that these measures will take a decade to implement particularly as those companies that must wait the longest are the very companies that employ a high proportion of the workforce and make a significant contribution to economic output.
"Furthermore it delays the flow-on benefits delivered to Australian households who would also benefit from a reduction in the company tax rate, primarily through higher real wages and increased employment."
Morrison announced all small businesses with a turnover of less than $10 million will be eligible for the instant tax write-off for equipment purchases of up to $20,000 made next financial year.
Unincorporated small businesses will also see an increase in the small business tax discount from 5 per cent to 8 per cent, with the turnover threshold increased from $2 million to $5 million.
Founding director and chairman of StartupAUS Peter Bradd has described the budget as a missed opportunity to advance the startup agenda in Australia and says tax cuts are not the only answer to a flourishing Australia.
"The budget address contained a lot of rhetoric around jobs and growth," he says.
"The reality is, both jobs and growth and our national economic advantage won't come from savings or these tax cuts alone, it will come from innovative business practices within existing businesses and startups.
"When you consider the ASX top 20 delivers 50 per cent of Australia's GDP, the obvious question is how can we get the ASX 20 to reinvest more of their earnings in R&D to drive greater growth?"
Bradd says the budget does not address this question.
"Unfortunately, much of the Government's innovation investment to date has been tilted towards traditional academic areas and government enterprise, neither of which have a good track-record of producing commercially compelling outcomes or jobs," says Bradd.
The Government says it aims to support innovation and better services through new products in services and FinTech, with $200,000 budgeted to promote the country as a financial technology hub.
The Australian Securities and Investments Commission (ASIC) will commence consultation on a regulatory sandbox for FinTech businesses who want to test their early stages ideas with clients.
The Government is looking to establish a regulatory sandbox where FinTech start-ups and businesses can test ideas for up to six months.
"Whilst the FinTech announcement and the expansion of the New Enterprise Investment Scheme are a step in a good direction, we need more," says Bradd.
"Research and development is critical to our future growth - I would like to see a lot more to encourage incubators and accelerators both within the startup community and outside it within big business."
Meanwhile, the Government has announced its intention to establish a Tax Avoidance Taskforce to crack-down on multinational tax avoidance.
The Government will provide the ATO with $679 million for the Taskforce over four years to strengthen efforts to ensure that multinational companies, private companies and high wealth individuals pay the right amount of tax.
The Government is set to introduce tough new laws and harsher penalties for those rorting the system including the maximum penalty for failing to lodge tax returns and similar documents increasing 100 fold from $4,500 to $450,000.
The Taskforce is expected to raise more than $3.7 billion in tax liabilities between now and July 2020.
The Government's GDP forecast for 2016-17 has been downgraded to 2.5 per cent, compared with 2.75 per cent forecasted as part of the Mid-Year Economic and Fiscal Outlook handed down in December 2015.
The Budget deficit stands at $37.1 billion for 2016-17.
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