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We brainstormed the tax changes we would like to see to help small businesses grow, cut red tape, keep worker’s employed and help the economy rebound. Please note, these are only ideas, they are not laws. We will be writing to industry groups and the Treasury to ask them to consider these ideas. We would love to hear if these changes would help your business.

  1. One-off PAYG credit of $5,000 for each staff member retained for 6 or 12 months after JobKeeper.

There is a high risk of additional employees being made redundant post JobKeeper. A scheme for JobKeeper employers to be rewarded for keeping employees in the long-term will help to reduce expected job losses.

  1. Special deduction of 150% of salary costs for one year for new workers hired from 1 July 2020 to 30 June 2022

While we have had accelerated depreciation for plant upgrades for many years, we have not had any incentives to hire new workers. An additional deduction for salary costs in the first year of employment would help small businesses to offset the costs of bringing on a new staff member and it will help to get jobseekers back in the workforce.

  1. Remove FBT and allow deductions on entertainment for 2 years from 1 July 2020.

Let’s allow small businesses to get out and about with customers by dining, conferencing and entertaining at local venues to negotiate deals, make connections and grow their own businesses while supporting other industries that have faced hardship. All subject to social distancing of course!

  1. Remove FBT requirement for new cars purchased by a ABN holder for purchase of business cars for two years

The removal of FBT on cars will encourage small business employers to upgrade their fleet and help rebound car sales. Based on our experience, the instant asset write off is not enough, small business owners are put off by the FBT implications.

  1. Tax credit or special deduction scheme for using Australian made inputs in supply chains.

We would very much like to see a scheme whereby all businesses, large and small, are encouraged to use Australian made inputs in their supply chain. For example, if your cost of goods sold includes a minimum of  50% of Australian components, this could correlate to a 10% reduction in your business tax.  Alternatively, if it is for consumables – eg. medical supplies, a special additional deduction could be made available. This will help encourage businesses to increase their demand for Australian manufacturing.

  1. Reinstatement of loss carry-back rules for 2 years.

As many small businesses may make a temporary loss in the 2019 and 2020 years, a loss carry-back will allow businesses to recoup tax paid in the previous two years. This scheme has previously operated in Australia and will give businesses additional capital to reinvest to grow their businesses and hire staff.

  1. Simplification of the company tax rate and franking account rules so that all companies with less than $50m of revenue pay 27.5% whether there is passive income or not.

The complex calculation of the company tax rate for small businesses is frankly embarrassing and difficult to explain. It needs to be simplified so that it is clear that there is one rate for all companies and it is on the way down to 25%.

  1. Extension of the ESIC (Early Stage Innovation Company) rules to include more start-ups and allow investors to have more than 30% ownership providing incentives for angel investors to invest in early stage companies.

The ESIC rules are an excellent example of legislation which encourages investment in early stage companies by providing investors with tax credits and 10 years capital gains tax free on their investment.  However, the rules are too restrictive and should be expanded to allow more scenarios to be included.  Small businesses need multiple options to raise capital outside of the banks and these rules will encourage further investment into new innovative businesses.

  1. Recreation of a tax effective infrastructure bond scheme to help fund national projects.  

We have clients with cash ready to invest in safe, long term tax effective assets who are nervous about the equity and property markets.

  1. Temporary increase of deductible super contribution cap to $50,000 per person per year for 3 years for members with less than $1.6M.

This will allow depleted superannuation balances to be rebuilt and liquidity improved in superfunds, balancing the long term saving with short term spending requirements of the country.

We will keep you up to date on whether any of our tax wish list comes true!

 

Date published: 26 May 2020

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