The federal government has revealed tax reductions for small businesses in the 2016 budget.
Starting from 1 July this year, the tax rate for small businesses will be reduced from 28.5 percent to 27.5 percent. The rate will continue to lower to 25 percent by 2026-27.
The definition of 'small business' has also been widened, with maximum annual turnover for businesses eligible for the new tax rate increased from $2 million to $10 million. The government expects this will affect approximately 870,000 businesses.
The threshold will continue to rise to $25 million in 2017, $50 million in 2018-19 and $100 million in 2019-20.
Treasurer Scott Morrison announced the changes as part of a ten-year enterprise tax plan.
“Small and medium businesses are driving jobs growth in Australia, and must continue to do so. They are also overwhelmingly Australian-owned and more likely to reinvest their earnings in future growth as they seek to build their businesses. A tax on their business is a tax on their enterprise and the jobs they provide,” said Morrison during his budget remarks.
Small businesses win, multinationals lose
The government also revealed its plans to crack down on multinational corporations shifting profits made in Australia offshore.
Companies earning more than $1 billion globally will be taxed at a higher rate of 40 percent for profits they shift offshore. Morrison said the restrictions should reclaim $3.9 billion over the next four years.
The Australian Taxation Office will be given a huge boost to combat corporate tax dodging. An extra $679 million will go to hiring 390 additional staff to fill out a 1000-person tax avoidance taskforce.
Individuals who report corporate tax avoidance are set to receive greater protections from 1 July 2018.
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