Realizing that small business operators are going through tough times with this current economy, the Australian government is giving an instant tax write-off of the first $5000 of any motor vehicle purchased from 2012 to 2013. This offer is intended for small business operators. This is because small businesses comprise 96 per cent of Australian businesses and are the backbone of the Australian economy as stated by Treasurer Wayne Swan.
Of Australia’s 2.7 million small businesses, it is the motor vehicle that is the main capital item. This offer will certainly improve cash flow and help business owners expand and reinvest.
This measure is seen as a part of the government’s tax reform programs that are to be introduced in 2012 to 2013 that will provide a write off on all assets that are valued at below $5000. The measure is estimated to cost $1.7 billion over the forward estimates.
Currently there are two depreciation pools with different depreciation rates. There is also planned a reduction in company tax rate to 29 per cent for small businesses.
These tax reforms will be available to all types of small businesses including sole traders. Businesses operating through trusts, partnerships, and companies are also eligible.
This new measure replaces the Entrepreneurs Tax Offset. It was recommended to be abolished by Australia’s Future Tax System Review (AFTSR) due to its high compliance cost and poor targeting. It concluded that the ETO is a disincentive for small businesses.
Since the ETO was only available to small business with turnover of less than $75000, there are 2.3 million small businesses that were not able to utilize the of benefit.
News and Image from: International Business Times »