Small businesses win as popular supports made permanent
Millions of businesses feeling the economic pain of the Middle East crisis will get some of their taxes back, as well as extra money to buy equipment to help them weather the storm.
Two permanent changes to the federal budget were approved by Finance Minister Jim Chalmers on Tuesday night as part of a broader $3.5 billion business tax cut package.
Those who will benefit include 2.7 million small businesses that will benefit from both measures and around 90,000 companies that will be eligible for tax refunds.
Small business owners with turnover of less than $10 million will be able to benefit from a permanent annual wealth tax deduction of $20,000 starting July 1.
The program already allows them to purchase equipment, furniture or vehicles and is expected to reduce compliance costs, such as record keeping, by about $32 million a year.
The second measure is to reintroduce two years of loss carrybacks of up to $1 billion per year for all businesses, including small businesses.
Carryback allows a business to offset earnings losses from the last two years’ profits, providing them with a tax refund.
The measure is expected to cost $2.3 billion over five years and will become permanent from July 1.
“It will be particularly valuable for established businesses that have been profitable in recent years but have experienced a temporary downturn,” budget documents said.
The government is also introducing loss refunds to help start-ups grow in their first two years from mid-2028, and expanding tax incentives for venture capitalists to support young businesses from mid-2027.
The maximum cap on expenses that can be claimed back under the research and development tax incentive will increase to $200 million to encourage more coastal investment.
“We are building a better tax system for business with over $3.5 billion in new measures that reduce taxes to encourage investment and innovation,” Dr Chalmers said.
The budget continues to aim to improve bureaucracy and productivity, with the goal of reducing the regulatory burden by $10.2 billion per year across a range of measures across various portfolios.
These include, as previously announced, working with states and territories to harmonize payroll tax, cutting paperwork, promoting electronic record keeping and harmonizing state retail tenancy regulations and other laws to encourage cross-jurisdictional business enterprise.
“This is the largest productivity increase in the budget since the 1990s,” Dr Chalmers said.
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