Small business gets tax cut head start

The federal government will cut income tax and red tape for small business as part
of its response to the Henry review - but the reforms aren't as far-reaching as the
Treasury secretary recommended.
Business groups labelled them "narrow" and review panel member Heather Ridout
declared "there's a lot more to be done".
From 2012/13, company tax for small businesses - those with a turnover less than $2
million - will be cut to 28 per cent from the current 30 per cent rate.
That reduction comes a year ahead of cuts for larger companies.
They'll have to wait to 2013/14 to have their tax cut to 29 per cent. It will then
drop to 28 per cent from 2014/15.
The government says the phased cut in the company tax rate will assist the
competitiveness of all Australian industries.
Labor is also allowing more instant write-offs for small businesses and simplifying
their depreciation arrangements.
The total package will cost $3.9 billion over the next four years.
Prime Minister Kevin Rudd says it will promote growth across the economy "addressing
the risk of a 'two-speed economy' by taking the brakes off the slower lane".
In his tax review, released on Sunday, Treasury boss Ken Henry found Australia's
company tax rate was high compared to other similar developed countries.
To ensure the country remained an attractive place to invest, the commonwealth
should reduce the company tax to 25 per cent "over the short to medium term".
While not going that far, Mr Rudd said "the government will seek to cut the company
tax rate further as revenue allows".
A decade ago Australia's company tax rate was 36 per cent. It was 49 per cent in the
mid-1980s.
The Australian Chamber of Commerce and Industry says reducing business corporate tax
rates to 28 per cent will make Australia more competitive in the Asian region.
But it doesn't compensate for the "unacceptable" increase in compulsory
superannuation to 12 per cent, chief executive Peter Anderson told reporters in
Canberra.
Dr Henry's review also recommends access to small business tax concessions should be
extended to companies within a turnover of up to $5 million.
While the government didn't adopt that proposal, it did up the threshold for small
business "low-value assets" from the current $1000 level.
But again, not as much as recommended.
The government went for $5,000, despite Dr Henry suggesting $10,000.
Under the Rudd government's change, from 2012/13 assets under $5000 can be written
off immediately.
That means small businesses "significantly reduce their need to track assets for
depreciation purposes". They also get an instant cash benefit.
Further, these businesses will be able to write-off all other assets (except
buildings) in a single depreciation pool at a rate of 30 per cent.
At the moment they are forced to use two pools - one short-term and another for
long-term assets.
The government says the changes will benefit 720,000 small businesses.
Ms Ridout - a member of the Henry review panel who also heads up the Australian
Industry Group - criticised Labor for not doing more on tax cuts and small business
red tape.
"We were much more generous than the government has been today," she told Sky News.
"They could have gone further. There's a lot more to be done here."
The Business Council of Australia rejected the government's response to Henry as
"narrow".
It had wasted an opportunity to simplify a complicated system where companies pay
both state and federal taxes, chief executive Katie Lahey said.