Cutting tax and red tape for small business

Small businesses often face the greatest challenges with paperwork and accessing working capital to invest to be more competitive. That's why the Government has introduced reforms worth more than $5 billion to 2016-17 to improve cash-flow and cut red tape for Australia's three million small businesses. Making the tax system simpler allows small business owners to spend less time on tax matters and more time on their businesses.

Simplified Depreciation Arrangements

Since 1 July 2012, small businesses have been able to immediately write off business assets they purchase that cost less than $6,500. This will make book-keeping a lot simpler by removing the need to track the depreciation of assets over a number of years.

Most assets costing more than $6,500 can be allocated to a single pool for tax depreciation purposes. Small businesses can also claim an accelerated initial deduction of up to $5,000 for new or used motor vehicles. The remainder of the cost can be pooled and depreciated at 15 per cent in the purchase year and then at 30 per cent in other years. This recognises that motor vehicles are important assets for many small businesses. Small businesses spent an estimated $3.5 billion on motor vehicles in 2010-11.

Improving Incentives for Small Companies to Innovate

The Government's new research and development (R&D) tax incentive doubles the rate of assistance available to small and medium sized companies and improves cash-flow by providing a 45 per cent refundable tax offset. The Government will further improve cash-flow for these companies by making the offset available in quarterly instalments from 1 January 2014, supporting further investment in R&D.

The Government has also tripled the tax free threshold - from $6,000 to $18,200 - which is estimated to benefit 1.4 million small business owners who are sole traders or hold an interest in a partnership or operate through a trust.

Reducing Superannuation Red Tape for Small Business Employers

The Government has established the Small Business Superannuation Clearing House - a free and simple online superannuation payments service that helps small businesses with less than 20 employees.

Combined benefit of new depreciation arrangements