The 25 per cent Entrepreneurs’ Tax Discount passed by the Parliament yesterday is expected to deliver a benefit to 540,000 Australian small businesses.
The discount allows businesses operating in the Simplified Tax System a 25 per cent discount on the income tax in respect of their business income.
Businesses with turnover up to $75,000 will benefit, while those with turnover of $50,000 or less able to claim the maximum 25 per cent.
The maximum possible benefit depends on the amount of tax that would otherwise be paid.
For example, if a company has a turnover of $50,000, the maximum tax it would pay would be $15,000 (ie 30 per cent of $50,000), although this would usually be reduced by deductions.
- The 25 per cent discount would reduce this tax liability by $3,750, to only $11,250.
If the business is not a company, such as a sole trader, then the maximum tax it would pay on a $50,000 turnover would be $11,172 (ie the application of the tax free thresholds and lower marginal rates), although again, this would usually be reduced by deductions.
- The 25 per cent discount would reduce this tax liability by $2,793 to $8,379.
The Entrepreneurs’ Tax Discount is expected to cost $1,160 million over the next four years.