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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