The Australian government has dedicated a core portion of the 2015-16 Budget to give small businesses a "fair go" to invest, grow, and create jobs.
The government has said that under the AU$5.5 billion Jobs and Small Business package, over 90 percent will be dedicated to tax relief measures, while the rest will be targeted towards helping reduce red tape and encouraging startups and entrepreneurship. The tax measures will include allowing small businesses with annual turnover of less than AU$2 million to have their tax rate lowered from 30 percent to 28.5 percent from July 1.
In addition, small businesses with an annual turnover of less than AU$2 million that are unincorporated will receive an additional annual 5 percent discount tax rate of up to AU$1,000 annually. This move will deliver a tax cut of AU$1.8 billion over the next four years, the government said.
Further to this, in an aim to reduce tax liabilities and improve cash flow, the federal government has announced that small businesses will be able to claim immediate tax deductions on items with a purchase value of up to AU$20,000. This is in comparison to the current threshold of AU$1,000, or where some professional costs associated with a new business startup are deducted over a five-year period. The government said this measure is estimated to have a cost to revenue of AU$30 million over the forward estimates period.
Treasurer Joe Hockey has highlighted that small businesses are the "engine room" of the Australian economy, and that it is important to "empower" them with benefits, particularly in a way that will improve their bottom line and cash flow.
"We are the only government that will deliver tax cuts for small business, because we want small business to grow and employ more Australians," he said.
In the Budget, the government has also committed to reducing red tape within the Fringe Benefits Tax (FBT) system, by expanding the FBT exemption for work-related portable electronic devices, including mobile phones, laptops, and tablets.
Small businesses will also benefit from Capital Gains Tax rollover relief when changing their legal structures but keeping the same owners. This measure will be available for businesses that change entity type from the 2016-17 income year, and is estimated to have a cost to revenue of AU$40 million over the forward estimates period.
Hockey said that he believes the Budget will encourage more Australians to start new businesses, which in turn would create new jobs. During 2013-14, more than 280,000 Australian small businesses were started.
The government has already committed to giving the Australian Securities and Investments Commission (ASIC) AU$7.8 million to implement and monitor a regulatory framework to facilitate the use of crowdsourced equity funding (CSEF), including simplified reporting and disclosure requirements.
"We will ease the financial strain by allowing business owners to immediately deduct the costs incurred when starting up a new business, or receive tax relief when restructuring their existing business," Hockey said.
"In addition, we are expanding the tax concessions for Employee Share Schemes to make it easier for small startup companies to attract the skills and talent they need to grow.
"Unlike the old system, under the old government, employees won't have to pay tax on their shares until they actually receive a financial benefit from those shares.
"This is great for workers, and it is great for innovative startups."
CEO and founder of Australian startup Local Measure Jonathan Barouch said the announcements made in the Budget are a good starting point, but more conversations still need to occur, especially around science, technology, engineering, and maths (STEM) education, shortage of engineers, and bringing talent in from overseas.
"Anytime you have the treasurer using the word startup three or four times during the speech around the Budget, I think it's a good thing. It's a very stark difference to where we were a year ago, where funds were pulled out of the innovation ecosystem. I think culturally, we're at a tipping point where you've got the number two guy running the country talking about startups," he said.
Similarly, the Australian Computer Society (ACS) applauded the government on its initiatives of helping startups reinforce their position in the economy, but suggested that more priority needs to be given to STEM education.
"Startups are drivers of innovation and jobs. It is critical therefore that government create an environment that supports and encourages them and, very importantly, keeps them in Australia. So the ACS welcomes the announcements in the Budget that provide immediate deductibility of professional expenses, removes obstacles to crowdsourced equity, and expands tax concessions for employee share schemes," said ACS CEO Andrew Johnson.