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Tax Cuts for Small Businesses for FY 2016-2017
As major drivers of Australia’s economic growth and employers of more than 5 million individuals, small businesses are now set to benefit from measures first announced in the May 2016 Federal Budget.
Just recently, parliament finally reached an agreement to reduce the corporate tax rate to 27.5% for companies carrying on a business and with an annual turnover of up to $50 million. This is in line with the aim of the “Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016” that seeks to lower the tax rate to 25% for all companies, no matter the turnover, over the next 10 years.
Tax cuts will be staggered, with a reduced rate applying immediately (i.e. the 2016-17 financial year) to companies with a yearly turnover of up to $10 million. This will be followed by companies with a turnover up to $25 million in 2017-2018, and those with a turnover of $50 million in 2018-2019.
Along with the reduction in the company tax rate, the government has announced that effective from 1 July 2016, it has “changed the definition of small business from an annual turnover of $2 million to $10 million…” This enables more companies to gain access to most, but not all, of the existing tax incentives as well as the reduced tax rate of 27.5% this 2016-2017 financial year. Note, lower turnover thresholds will continue to apply to some existing small business reliefs, most notable being the Small Business Capital Gains Tax (CGT) concessions.
Minister for Small Business, Michael McCormack said in a press release that “…lower taxes mean small businesses can grow, pursue new ideas, and create more jobs.”
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