Taxation Business tax measures


Budget Review 2009-10 Index

Budget 2009 10: Taxation

Business tax measures

Kali Sanyal

On 12 May 2009, the Treasurer announced in the 2009–10 Budget important new measures to offer the small business sector a package of benefits and flexibility in dealing with tax issues, providing the sector with incentives to cope with the global financial crisis.

This paper discusses those initiatives in business tax system, mentioned in the 2009–10 Budget Overview.

R&D tax credit reform for business[1]

From 2010–11, the Government will introduce a simplified R&D tax credit in place of present R&D concessions to businesses. The complex ‘premium concession’ and ‘international premium’ will be abolished. The new tax credit will provide a 45 per cent refundable credit for firms with an annual turnover of less than $20 million—equivalent to a tax concession of 150 per cent. This means that firms will receive a tax refund of 45 per cent of their R&D spending when they file their tax return.

The refundable credit will also be available to small companies in tax loss, with no limit on the level of R&D expenditure. It is estimated that around 5500 small firms stand to benefit under these new arrangements.

Businesses with a turnover of more than $20 million will also benefit from the new scheme, with access to a 40 per cent non-refundable credit—equivalent to a tax concession of 133 per cent. Companies undertaking R&D in Australia where the intellectual property is held offshore will also be able to access the 40 per cent non-refundable credit.

As a transitional measure for 2009–10, the R&D expenditure cap for the existing R&D tax offset will be lifted from $1 million to $2 million. The cap is the maximum amount a firm can spend on R&D to be eligible for the tax offset.

The reform of the R&D tax concession is complementary to the new $196.1 million Commonwealth Commercialisation Institute initiative.

Small business and general business tax break[2]

This measure will enable small businesses to claim a bonus tax deduction of 50 per cent—up from 30 per cent previously—of the cost of eligible assets acquired between 13 December 2008 and 31 December 2009, and installed by 31 December 2010.

The incentive:

  • is expected to encourage small businesses to invest in new capital items, such as computer hardware and business vehicles, and to make capital improvements to existing machinery and equipment.
  • will be available to small businesses with a turnover of less than $2 million.

All other businesses will continue to access the tax break at 30 per cent for eligible assets contracted prior to 30 June 2009, and 10 per cent for eligible assets that they commit to investing in between 1 July 2009 and 31 December 2009.

The estimated cost of this incentive package will be $141 million. For more detailed information about the tax break and the expansion for small business see the media release issued by the Treasurer and the Minister for Small Business on 12 May 2009.[3]

Strategic compliance – supporting businesses and other taxpayers in financial distress[4]

The Government has allocated $100 million to the Australian Taxation Office (ATO) over four years. With this allocation, the ATO will assist small businesses and other taxpayers experiencing financial distress to remain viable and stay engaged in the tax system.

The ATO will offer support to at-risk taxpayers, including early identification of those experiencing financial distress and continuing to provide flexible payment arrangements.

The measure has an estimated revenue outcome of $56 million in the forward estimate period.

Improving business cash flow[5]

This measure provides cash flow relief to small businesses by reducing PAYG instalments for the 2009–10 income year for all taxpayers who pay quarterly PAYG instalments based on their previous year’s tax adjusted by GDP growth.

The GDP adjustment factor for calculating quarterly instalments under the GDP adjustment method currently in practice will be reduced from 9 per cent to 2 per cent.

This measure will apply to about 1.5 million eligible small businesses, individuals, and trusts, and complements the earlier guarantee of on-time payment for small business contracts as well as planned changes to business regulation which will help to reduce compliance costs. 

The measure will have no net revenue implications over the forward estimates period.


[1].    W Swan (Treasurer) and K Carr (Minister for Innovation, Industry, Science and Research), R&D tax credit to boost small business investment, media release, Canberra, 12 May 2009, viewed 18 May 2009, http://www.treasurer.gov.au/DisplayDocs.aspx?doc=pressreleases/2009/062.htm&pageID=003&min=wms&Year=&DocType=0

[2].    W Swan (Treasurer) and C Emerson (Minster for Small Business, Independent Contractors and the Service Economy), Small business tax break boost, media release, Canberra, 12 May 2009, viewed 18 May 2009, http://www.treasurer.gov.au/DisplayDocs.aspx?doc=pressreleases/2009/061.htm&pageID=003&min=wms&Year=&DocType=0

[3].    Swan and Emerson.

[4].    Australian Government, ‘Part 2: Expense measures’, Budget measures: budget paper no. 2: 2009–10, Commonwealth of Australia, 2009, p. 390.

[5].    Australian Government, ‘Part 1: Revenue measures’, Budget measures: budget paper no. 2: 2009–10, Commonwealth of Australia, 2009, p. 26.

 


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