Struggling SMBs get Budget relief

The Labor Government will reduce small businesses' tax liabilities as part of an anticipated $1.5 billion Budget surplus tonight.

Treasurer Wayne Swan will release the Federal Budget for 2012/13 at 7.30pm AEST.

Swan last November predicted a $1.5 billion surplus, up from a $37.1 billion deficit in 2011/12.

He yesterday said the “modest surplus” would introduce opportunities for small businesses to reduce tax liabilities.

The announcement stems from a recommendation made by the Government's Business Tax Working Group for “loss carry-backs” for businesses.

Small businesses reporting a loss from 1 July this year, but a profit in 2011, will be able to claim losses of up to $1 million against tax paid in the two years prior.

Those claiming the full $1 million will be refunded $300,000, representative of the 30 percent company tax rate.

The Government expected 110,000 small business to be eligible for the loss carry-back scheme over a four year period. Small businesses running as partnerships and sole traders are not eligible. Further details will be released tonight. 

The measure is the second early release reform by the Government for small businesses.

Last September Swan announced the Government will raise the threshold for instant asset write-offs from $1000 to $6500, to reduce compliance costs and improve cash flow for small businesses.

Immediate write-offs of up to $5000 will be introduced for motor vehicles, with the remainder written off at 15 per cent in the first year and 30 per cent for following years.

Small businesses will be able to write off other assets excluding buildings in a single depreciation pool at a rate of 30 per cent, 15 per cent in the first year. The Government will also reduce the company tax rate from 30 percent to 29 percent for small businesses. 

“This will be a significant package for small businesses across Australia that aren't in the fast lane," Swan said.