Joe Hockey set to repeal small business tax concessions
A suite of business tax measures is to be repealed, but the Coalition government’s move is headed for a hostile Senate and Treasurer Joe Hockey needs ALP support to get his measures passed before July 2014.
The moves will wind back Gillard government changes that increased the threshold for asset write-offs and retrospective tax claims.
And incrementally increased super contributions for all employees will have a two-year pause in their introduction. A government co-contribution to the super of low-income earners will also be scrapped.
The measures were tied to the Minerals Resource Rent Tax, which Hockey has a mandate to scrap.
The Council of Small Business Australia chief executive Peter Strong said COSBOA had advised Hockey prior to the election not to repeal the tax breaks, because they were “good”.
“You don’t want confusion, because that impacts confidence. The best thing they can do is say the MRRT has to go through Parliament, but these measures will stay,” he said.
The reforms introduced in 2012-13 aimed to step-up super contributions from nine per cent to 12% by July 2019. The mandatory contributions have already risen to 9.25% but Hockey’s changes will delay their next step up to 9.5% until 2016.
“Any reductions in businesses’ overall wages bills would lower their operating costs, while employees could also receive more take-home pay in the near term,” the draft document states.
The bill also aims to repeal loss carry-back or the ability for businesses to claim up-to $1 million as a tax deduction on past years when they paid tax. Depending on tax rates and earnings, the move allowed loss-making companies huge rebates.
Another sweetener, which let businesses write-off assets up to $6500 and the first $5000 of vehicles in the financial year they were purchased will be dramatically pared down. Hockey has scrapped the vehicle write-down and made assets worth up-to $1000 deductible in the first financial year. Any others would be depreciated 15% in the first year and 30% each year after that.
Hockey said in a media release yesterday that the suite of changes would save the government $13 billion.
“The former government linked a number of spending measures to the failed MRRT. These came at a significant cost to the budget, to the point where the government is borrowing money to pay for these commitments,” he said.
CPA Australia backed Hockey’s repeals, saying they had been “telegraphed” prior to the election.
"There are certain initiatives that we like and that business likes – such as the $6500 instant asset write off for small business – but given the budget challenges, tough decisions need to be made," a CPA spokesperson said.
The exposure draft of the legislation is open for comment until October 31.
The legislation is to be introduced in federal Parliament in November.
Greens leader Christine Milne has said her party would not support the repeal of the MRRT.
“We should be making the [MRRT] more effective by increasing the rate and fixing up the loopholes created when Labor caved in to the big miners,” she said.
An official at ALP Leader Bill Shorten’s office said the party’s intentions would need to be debated at shadow cabinet, but they were opposed to a cut in the government’s contribution to low-income earner’s super.
This story first appeared on SmartCompany.