SMALL businesses will need to carefully plan how they structure their superannuation payments if they are to benefit from last night’s Federal Budget, says Pricewaterhouse Coopers partner Jason Daniels.
He says there were few surprises in the budget for SMEs as most changes were flagged in the Henry Tax Review, but touted the outcome as responsible from an economic standpoint.
The budget outlined a boost in the Superannuation Guarantee Charge (SGC) from 9 to 12 per cent by 2020, along with a company tax cut from 30 to 28 per cent by 2012, but Daniels sees shades of grey as to how individual businesses will benefit.
“It’s going to depend on the individual business and whether the SGC is included in company contracts,” says Daniels.
“There will be implications for businesses that are heavily reliant on casual labour rates where the SGC is on top of the award labour rate – in this case the SGC will more than offset the cutting of tax.
“Also, the tax cut is only brought forward for small business, with a threshold of $2 million, but one of the recommendations of the Henry Tax Review I’d like to see acted on is increasing that threshold from $2 million to $5 million.
For SMEs to qualify for small business tax cuts they must follow an incorporated business structure, so businesses that follow trust structures will not be able to capitalise on the budget initiatives.
“I’d say if I look at my clients roughly half of them would follow an incorporated company structure,” says Daniels.
“Also, the ability to claim fixed assets up to $5000 is a significant advance but the cost of the SGC is something that SMEs will really have to plan for.”
Daniels supports the $5.6 billion infrastructure fund, highlighting that it will benefit SMEs not only through increased activity and job creation, but will improve the efficiency of the economy.
Australian Retailers Association executive director Russell Zimmerman says a two year wait for company tax cuts is too long, urging the Federal Government to introduce the 28 per cent tax rate sooner
“The decision to expedite a cut in company tax rate from 30 to 28 percent for small business was announced last week and will mean little for retailers who will also be hit with increased superannuation payments for employees,” he says.
"The only consolation for retailers and other small business owners is that further announcements regarding the Henry Tax Review may finally answer calls for payroll tax to be abolished, supported by almost 55 percent of retailers.”
“The tax write-off for assets under $5000 was also part of the Henry Review and like reductions in company tax, will not come into effect until 1 July, 2012.”
The Industry Super Network (ISN) has welcomed the budget’s moves to ‘reinvigorate’ a savings culture, with chief executive David Whitely supportive of a 50 per cent discount on bank account interest.
“The Budget builds further on the historic superannuation reforms of the last two weeks by strengthening the environment for savings and investment,” he says.
"There is always a need for individuals to have short term savings and this new measure will help renew a savings culture in the community which should hopefully carry over to superannuation.
"In addition, the incentives may allow individuals to reach their short term savings goals sooner, bringing forward the point when they can consider additional contributions into long term savings such as superannuation.”
Deloitte private tax partner Spyros Kotsopoulos says the decision to simplify tax returns is a positive step, with increased standard reductions raised from $500 to $1000.
“This is a positive initiative by the government. Moving to a flick and tick system of pre-filled tax returns will make both the taxpayer’s and the ATO’s life easier,” he says.
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