The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Wayne Swan

Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

5 July 2012

Tax relief for Australia's 2.7 million small businesses

Joint media release with
The Hon Brendan O'Connor MP
Minister for Small Business
and
Graham Perrett MP
Federal Member for Moreton

More than 2.7 million small businesses have begun to share in the benefits of the mining boom thanks to major new tax relief measures starting for businesses across the country this week.

The Gillard Government is using the Minerals Resource Rent Tax to deliver tax breaks for small businesses through an increase to the instant asset write-off and a new loss carry-back initiative.

These measures will cut red tape and help small businesses to improve their cash flow so they can reinvest and grow their businesses.

The Government is also tripling the tax-free threshold – from $6,000 to $18,200 - which will benefit 1.4 million small business owners who are sole traders or hold an interest in a partnership or operate through a trust.

Hard working small businesses like the one we're visiting today in Brisbane today are the backbone of our economy, supporting jobs and driving national prosperity, which is why we're delivered these new tax breaks.

This small business tax relief has started to flow despite the fact Tony Abbott and the Liberals voted against it in the Parliament.

Mr Abbott voted to give Clive Palmer and Gina Rinehart a tax cut rather than provide tax relief for Australian small businesses.

Instant asset write-off

From this week, the Government's new $6500 Instant Asset Write-off will help Australia's 2.7 million small businesses to invest and improve their cash flows.

Small businesses are now able to instantly write off each and every asset they purchase costing less than $6,500, rather than depreciating them over time.

This is a more than six-fold increase from the $1,000 instant asset write-off under the old arrangements.

That means a café owner can now purchase six fridges valued $6,000 each and each fridge can be instantly written off.

Assets costing $6,500 or above can now be depreciated in a single pool (15 per cent in the year of purchase and 30 per cent in subsequent years).

In addition, small businesses will be able to claim up to $5,000 as an immediate deduction for new or used motor vehicles acquired during the 2012-13 income year.

The remainder of the motor vehicle's cost will be pooled in the new single general small business pool. This recognises that for many small businesses their biggest asset is a ute, car or van.

Maintaining a strong cash flow is vital for small businesses and the less time small business people spend with their tax return, the more time they have to grow their businesses.

The instant asset write-off will benefit small businesses whether they are run by sole traders, partnerships, trusts or through companies.

Loss Carry-back

Companies not in the fast lane of our economy are now able to invest in their people, equipment and ideas, knowing that they'll be able to carry back losses at tax time.

In its first 4 years, the new loss carry-back scheme is expected to benefit 110,000 companies at a cost of $714 million, helping them to ride out the tough times and invest in a brighter future. Around 90 percent of the beneficiaries are expected to be small businesses.

This measure will allow companies to carry back up to $1 million of losses to offset them against previous tax paid, providing a cash benefit of up to $300,000 per year against tax previously paid.

Businesses will now have access to their tax losses when they need them, whether they're a tourism provider refurbishing while they keep on valuable staff or a manufacturer needing to retool in order to move up the value chain.

Companies will be able to carry back losses by one year in 2012-13 and by up to two years from 2013-14.

Tripling the Tax-free Threshold

The Government is tripling the tax-free threshold from $6,000 to $18,200 from the 2012-13 financial year - the largest increase in the history of the tax-free threshold.

More than 7 million low- and middle-income earners will receive a tax cut, and more than 6 million will receive a tax cut of more than $300.

It's worth noting that around 1.4 million small business owners who are sole traders or hold an interest in a partnership or operate through a trust will benefit from the tripling of the tax free threshold.

The Government will also continue support to small business through the Small Business Support Line.

This service provides initial advice and referrals to small business on matters such as obtaining finance, cash flow management, retail leasing, promotion and marketing, and personal stress and hardship counselling.

The Support Line can be accessed on 1800777275 between 8am and 8pm weekdays or by email at sbsl@innovation.gov.au.