I read a headline in the Australian Financial Review this morning that “Small Business Wins Tax Write-Off”! Woo hoo I thought. Finally something for small biz. Don’t count your chickens….
On further reading, what the budget actually says is that now I can claim up to $5000 instant write-off on capital purchases, including cars purchased between 2012 and 2013. Uhm…. I don’t need a car, but thanks anyway.
To fund the deduction, our Treasurer has decided to cut the Entrepreneurs Tax Offset – which gave micro-businesses an automatic tax rebate of up to $2,750. Your accountant would’ve been all over this each year they do your tax return. The maximum refund amount ($2,750) is available when your total business income is under $50,000. As your business income increases, the refund decreases cutting out at $75,000. The ETO therefore benefited a large number of Australia’s self-employed – mostly independent contractors.
Over 402,000 micro-businesses claimed that deduction in 2008-09.
Under this new benefit, a tradie for example will need to spend $33,960 on a new ute to receive a tax benefit of just $1,275. So he has to spend big in order to receive relatively little – when under the ETO that same tradie could receive the tax rebate of up to $2,750 depending on his income.
It’s been argued that the ETO benefited only a small proportion of small business but abolishing it now provides a disincentive for people to start new businesses as it helped precisely those people get a kick along. It also helped a large proportion of Australia’s small business sector – the micro-businesses and non-employing business – every year – not just when they had the money for large capital outlay.
Here are two good articles covering this particular part of the budget:
Good article from Independent Contractors Australia covering who the ETO helps and who now stands to miss out:
Smart Company’s article here:
“Small business is very much in the forefront of our thoughts”, said Treasurer Swan.
Maybe not so much ‘small’ business as business that can afford large capital purchases.
©Lyn Prowse-Bishop – www.execstress.com