Date issued: 6 May 2009
Next week's Federal Budget must provide assistance to small business to help the Australian economy avoid the worst of the global economic downturn and the potential impact on the jobs of more than four million Australians employed by small-to-medium enterprises (SMEs), CPA Australia president Richard Petty said today.
'That is why we believe any future stimulus package must extend tax breaks in the form of tax credits to the SME sector which could boost business investment by billions of dollars,' Professor Petty said.
'CPA Australia believes the Australian Government should extend the proposed small business tax break by 12 months*. A 12-month extension of this benefit will enable small businesses to make more strategic decisions for longer-term gain.
'Further to this, the government should ensure the benefit is available to business as a fully refundable tax credit which is available when businesses lodge their business activity statements. These can be lodged on a quarterly basis, or more frequently.
'This will mean a wider range of businesses can enjoy the tax break without waiting to lodge an end-of-year tax return. A fully refundable tax credit will also allow businesses to apply the credit to a wider range of tax liabilities.'
Professor Petty said a more flexible approach to paying tax as you go (PAYG) is also required and will assist small business to survive by allowing them to reduce the impact on cash flow.
'The government must be more flexible in its approach to PAYG tax instalments. We acknowledge that the government has already reduced the February 2009 PAYG instalment by 20 per cent but more can be done,' he said.
'It is clear that for many businesses, their tax payable for 2008 – 09 will be lower than the amount payable under the PAYG instalment system and in some cases substantially lower.
'With possible penalties for getting the PAYG variation wrong by more than 15 per cent, it is likely that many businesses will not take the risk and will continue to overpay their PAYG instalments, tying up unnecessary cash to meet tax obligations that will eventually be refunded to them in any case.
'These rules should be reviewed and made more flexible to enable businesses to more confidently vary their PAYG instalments where their circumstances have changed, and improve their cash flow,' Professor Petty said.
'We are pleased to see that the government has guaranteed the personal tax cuts. As the vast majority of SME's are not incorporated — and therefore pay personal tax — hundreds of thousands of businesses across the country will benefit from these cuts.
Other budget initiatives for business should include:
- a higher research and development (R&D) tax concession of 200 per cent or an equivalent value tax credit (fully refundable) for R&D into new or improved low emissions, and carbon capture and storage technology
- accelerated depreciation for capital expenditure on replacing or upgrading existing plant and equipment with lower-emissions technology
- up-front investment allowance of 20 per cent for capital expenditure on low emissions technology
*Proposed in the Australian Government's December 2008 stimulus package. It is proposed that small business will be able to claim an additional 30 per cent tax deduction for eligible assets costing $1000 or more which they acquire from 13 December 2008 to 30 June 2009, and install by 30 June 2010.