After some reshuffling and reallocation of funds, the fiscal budget will be back in black in 2013. The government has had to delay and cut altogether some of its previous promises to make this happen. As usual, I have just focused on the impact on small business and working families in this post.
Lower Tax Rate Axed After promising a 1% reduction in company tax (down to 29%), the government has removed this altogether after it became clear it would not get passed in Parliament. Company tax will remain at 30%. In a speech this week to the NSW Business Chamber of Commerce, Treasurer Wayne Swan said that the government is committed to reducing this tax in the future. Loss Carry Back Initiative From 1 July 2012, companies will be able to carry back up to $1 million of tax losses each year and receive a refund on tax paid in the previous year. Up until now, companies have only been able to carry a loss forward. This initiative is designed to support businesses in difficult economic times as a result of overseas competition and the rise of the Australian dollar. But it also supports innovation. This initiative will promote calculated risk taking in businesses. If you want to embark on a new idea, but are worried about potential losses associated with starting something, a tax refund can soften a potential blow. Similar loss carry-back initiatives have been introduced in the US, UK, Germany and France. Immediate Deduction for New Business Assets Small businesses will be allowed to claim an immediate deduction for business assets costing less that $6,500. Also, if you purchase a new or used vehicle for your business, you will be able to immediately write off the first $5,000. I love these changes. Not only will they come off your books quicker, it will save time having to managing a multitude of depreciation spreadsheets over many years.
School Allowance The biggest announcement in this area is the introduction of the SchoolKids Bonus policy. Families who qualify (about 1 million) will receive $820 a year for each child in high school, and $410 for each child in primary school. This will replace the education tax refund (ETR). Under the ETR, families were able to claim a 50% rebate on some school-related expenses of up to $1500 per high school child or $750 per primary school child ($750 and $375 rebate). Many families simply did not claim. Only families who qualify for Family Tax Benefit A will be eligible for the SchoolKids Bonus (families earning less than $101,000 per year if they have one child in primary school). Those families earning over this amount will not qualify for the new scheme and will no longer be able to claim for any school expenses. Family Tax Benefit A Changes From July 2013, the maximum payment will increase by $300 per year for families with one child and by $600 per year for families with two or more children.
The government was going to be criticised if it didn’t meet its promise to be back in black by 2013. By hook or by crook, they have delivered a budget that shows this. Many people are arguing over the appropriateness of the “how”. The government are damned if they do, damned if they don’t. As a minority government, it has been difficult to deliver. And layering the appalling behavior of some of it members only adds to this challenge. As a result, the public are pretty cynical. However, if we can at least get out of the red, it is a good place to start. And we are certainly better off than most countries around the world at the moment. How will the budget impact your business and family?