The Federal Budget was unveiled last night and was dominated by initiatives aimed at the business sector. While SMBs will see tax cuts and improved incentives, startups have scathing criticism about the perceived lack of benefits for their industry. Here are the details.
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The Federal Treasurer Scott Morrison was keen to promote how the new budget will help SMBs, that are collectively one of our country's biggest employer, and announced a reduction in the corporate tax rate from 28.5 per cent to 27.5 per cent from July 1. While previously, only SMBs with a turnover of less than $2 million could benefit from this kind of tax cut, the threshold is now $10 million. This turnover threshold will progressively increase until it reaches $25 million by 2018.
By 2025, the corporate tax rate will also gradually drop to 25 per cent. For unincorporated businesses, the tax discount for them has gone up from five per cent to seven per cent.
Tax deduction on business equipment under $20,000 has now been extended to businesses with under $10 million turnover as well.
SMB accounting software company MYOB lauded the Government's focus on the smaller end of town in this year's budget but wanted the significant changes to the company tax to be implemented now rather than in a decade's time.
"It's like SMBs have been given a terrific present but told it is coming in pieces and they can't open it up for decades," MYOB CEO Tim Reed said. "MYOB also welcomes the move to widen the eligibility for the $20,000 tax write off for small businesses however the Government should consider making this a permanent feature to support the economy."
He was pleased with the announced simplification of Business Activity Statements which will make GST compliance easier for SMBs.
While startups do reap the benefits brought in by changes to the SMB taxation system, there is overall disappointment at the Government at the lack of investment in this growing sector.
Australia's peak advocacy group for startups StartupAUS noted that almost all the measures relevant to startups that has been alluded to in the Treasurer's budget speech had already been announced six months ago. This includes the New Enterprise Investment Scheme (NEIS) which has been expanded to cover financial technology startups.
"The Government is making much of its support for Australia's transition to a 'new economy'. But 'new economy spending in this budget has taken the form of billions of dollars spent on old economy industries, like ship-building and traditional rail," StartupAUS CEO Alex McCauley said. "R&D spending doesn't feature prominently. This is a disappointing and outdated approach.
"Australia needs to substantially boost its R&D spending if it wants to measure up to its international competitors — we are well outside the top 10 countries globally both in terms of absolute R&D expenditure and as a percentage of the GDP."
He noted that there is more money from the budget being blown on helping mining companies prospect for resources than to help create a supportive environment to nurture entrepreneurs to build high-growth technology companies in Australia. Overall, McCauley saw this year's budget as a missed opportunity for the Government to aid startups in the country.