What does the Henry Tax Review do for Small Business?

The Rudd Government's response to the Henry Tax Review has delivered some major changes for small business, defined as, business with an annual turnover of less than $2 million.

The most significant benefit is the ability to claim a tax deduction for plant and equipment up to $5,000 and depreciate plant and equipment at 30%. Once you get over the initial hype small business will realise that this is only a timing benefit allowing them to bring forward tax deductions and only marginally improve cash flow.

In the meantime small business owners will be required to increase their superannuation contributions from 9% to 12%. The 12% rate will commence from 1 July 2019. Furthermore, small business owners will also now have to bear the additional costs of paying superannuation guarantee contributions for employees over the age of 70, a move that will discourage business operators from employing senior Australians.

The reduction in the company tax rate to assist small business companies will have little or no impact to most small businesses. What the Government has failed to realise is that most small business operators do not carry on their business in a company, they either operate as individuals, partnerships or through a family trust, and therefore the reduction in the tax rate will have little impact other than being a popular political stunt.

Unfortunately the Government's response seems to be more politicly motivated than a real desire to make the current tax system fairer and simpler.