What changes in tax should SMEs be across under the new Abbott government

The Abbott Government has moved quickly to put its stamp on several areas of policy, and changes are in store that will affect key parts of your business, such as workplace relations, workplace safety, employee awards, vocational education and training, apprenticeships, and key planks of the Fair Work Act such as bullying and parental leave. 

Let's focus on tax changes 

It is clear that we are all confident that the Abbott government will support small business.

We’ve been tied down with red tape for so long now and its great to see that this red tape is being removed and we can get on with running our businesses.

The Abbott government is already showing they’re serious about these changes by cutting the carbon tax.

If you were to only take away 3 key points from this blog post I would want them to be these:

  • The carbon tax is gone…and I will explore what this should mean to you as a business owner
  • From 1st July 2015, the company tax rate will be reduced by 1.5%
  • FBT on motor vehicles  will essentially revert back to where it was

These three points are the most likely to effect you. However, we all know tax and compliance is a complex and ever changing area so it is important that you and your accountant remain up to speed with the proposed and implemented changes under the Abbott government.

The Small business minister Bruce Billson has retained his cabinet-level role and for the first time this role is held by a minister without numerous other ministerial portfolios. This is great news for business owners and will hopefully see real change come to fruition.  

Carbon Tax 

The Carbon Tax debate has been a long one. With the pros and cons being discussed from every angle. The election results were pretty clear – the public weren’t happy with the carbon tax and insisted on change.

Company Tax Rate 

The other main tax cut that will effect business owners, is the cut of 1.5% to the company tax rate, bringing it down to 28.5% from 1st July 2015.

This is something that business groups have been demanding for some time to help them through a period of slowing growth.

The tax cut is part of the plan to create jobs and this, along with the increase in superannuation guarantee to be frozen at 9.25%, will help the cash flow of businesses.

Abbott pledged the cuts would "boost jobs and strengthen the economy" and pointed at Labor's failure to carry out its promise of a two per cent reduction.

The principal beneficiaries if this cut would be workers.

FBT on Motor Vehicles

The Labor Party’s controversial FBT change announced earlier in the year to abolish the statutory formula method for working out the FBT on car fringe benefits will not proceed.

Employers can therefore continue to use the statutory formula method for calculating FBT on salary packaged and employer-provided vehicles. 

Because of the Labor Party’s 16 July 2013 transitional rule start date for this proposal, it was already having the following impacts despite not yet being passed into law via legislation:

1. New arrangements between employees and employers were being put on hold pending the outcome of the Election

2. Employers and employees who had pre 16 July arrangements were reluctant to make material variations such as vehicle upgrades or refinancing, and

3. According to media reports, salary packaging providers and car dealers were laying off staff, as vehicle orders had dramatically dried up after 16 July.

The retention of the statutory formula method will come as a relief for the many employees who have a vehicle as part of their salary package and use the vehicle largely for private purposes. Had the Labor Party’s reform gone ahead, it would have resulted in significantly increased FBT in the many cases where the employee uses the vehicle largely for private purposes.

As the Labor Party’s proposal was never actually law the new Government does not need to pass legislation to abolish it. 

1.5% levy

Whilst this last point may not directly effect most SMEs, it is important to still be aware of it.

There will be a 1.5% levy on companies with taxable income above $5 Million to fund to its Paid Parental Leave Scheme

Abbott intends to increase company tax on Australia's biggest 3200 businesses by 1.5 per cent to pay for his "signature" paid parental leave scheme which would allow women on as much as $150,000 a year six months off to look after a newborn child.

If you need some direct advice on how these changes will effect your business please contact us at ourteam@azuregroup.com.au 

Congratulating Azure Group clients who made the BRW Fast 100 for 2013
Special tax policies upon VAT and sales tax for small scope business enterprises

About Author

Michael Derin
Michael Derin

Michael Derin, Azure Group's Founding Partner and Chairman has over 28 years’ experience as a qualified Chartered Accountant within the business and commercial sectors. Michael works across our Technology, Corporate Advisory and CFO operations, managing highly complex projects to success.

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