The federal government says small business owners, full-time wage earners and companies will benefit from tax concessions and cuts.
Small business owners will pay less tax from July 1 following measures announced in Tuesday’s federal budget.
The small business tax rate will be lowered to 27.5 per cent and the turnover threshold to access it will be increased from $2 million to $10 million.
“This will mean 870,000 businesses, employing 3.4 million Australians, will have their tax rate reduced,” federal Treasurer Scott Morrison said.
Businesses with a turnover of less than $10 million will be able to access other tax incentives, including the small business depreciation pooling provisions and the Pay-As-You-Go installments payments option.
“Small and medium businesses are driving jobs growth in Australia,” Mr Morrison said.
“A tax on their business is a tax on their enterprise and the jobs they provide.”
An incentive allowing small businesses to instantly write off equipment purchases of up to $20,000 will be extended until June 30, 2017.
‘Bracket creep’ prevention
Middle-income earners have been rewarded in this year’s budget with measures preventing around 500,000 taxpayers from facing the second top marginal tax rate.
From July 1, 2016, the upper limit for the middle income tax bracket will be increased from $80,000 to $87,000 per year.
This means they’ll pay 32 cents tax on the dollar for longer instead of 37 cents.
“Those earning ‘average wages’ should stay in the middle income tax bracket,” Mr Morrison said.
“This is about providing room in our tax system for average full-time wage earners to earn more without being taxed more.”
Company tax rate to be reduced to 25 per cent
The federal government says it will also reduce the company tax rate to 25 per cent over 10 years.
The government plans to extend the lower tax rate of 27.5 per cent to all businesses by stepping up the threshold each year until 2023-24.
“This is an important measure in securing our future prosperity,” Mr Morrison said.
“If we wish to continue to see our living standards rise with more jobs and higher wages, we need to ensure our tax system encourages investment and enterprise.”
Australia has the seventh highest company tax rate of the 34 OECD countries.