Roberts and Cowling

The long-awaited Henry Review was presented by the Federal Government on the 2 May 2010. It announced a fair amount of change for small business which will come into affect over the coming years. Here is how the Henry Review (and the Governments response) will affect you.

Company Tax Rate Cut

From the 2013 financial year, companies operating small businesses will receive a cut of 2% to their income tax rate. This will take the income tax rate to 28% for companies operating a small business. Larger businesses will phase in their 2% tax cut over the following 2 years.

From 1 July 2012, small businesses will be provided some relief on depreciating assets purchased from that year on. The government will allow the immediate write-off of all assets worth less than $5000. This is a vast improvement from the current level of $1000 and will provide small business with far greater immediate tax benefits from the assets purchased under $5000.

They have also announced that assets over $5000 can be pooled in one depreciation schedule and depreciation can be calculated at 30% for each asset. This applies to all assets apart from buildings. Again, this is a marked simplification on the current depreciation rules and will allow for further acceleration of depreciation on most assets.

This is one measure that may not be overly popular with small business. The government has announced that the superannuation guarantee rates will increase to 12%, up from the current level of 9%. The increase will be phased in from the 2014 to the 2020 financial year. Following are the rates for each financial year:

                2014-                     9.25%

                2015-                     9.50%

                2016-                     10%

                2017-                     10.50%

                2018-                     11%

                2019-                     11.50%

                2020-                     12%

The government will contribute $500 to all taxpayers superannuation who earn less than $37,000 from the 2013 financial year on.

The concessional cap in place currently from 1 July 2012 is $25,000 for taxpayers aged 50 and above. After the Henry Review, the concessional cap will be $50,000. This means that taxpayers, aged 50 and over, can contribute up to $50,000 per annum under a concessional arrangement (providing a tax deduction), without penalty any extra penalties within the super fund.

There are a raft of other measures that have been announced, in particular the Resource Super Profits Tax and other measures. For more information on these measures, please visit the ATO at www.ato.gov.au. Where we feel that the measure may impact on our clients businesses, we will endeavour to keep you up to date at www.robertsandcowling.com.au.