Labor claims Liberal Treasurer Joe Hockey’s 2014-15 Federal Budget will hurt 3.2 million Australian small businesses because of the $4.6 billion in new tax hikes, including slashing the instant asset write off.
- Increasing taxes on small business by cutting the instant asset write-off ($2.9 billion tax hike)
- Increasing taxes on small business by scrapping the loss carry-back initiative ($900 million tax hike)
- Increase taxes on small business by scrapping the immediate deduction for motor vehicles ($400 million tax hike)
- Increasing taxes on Australia workers because their employers won’t contribute as much into concessionally taxed superannuation ($1.6 billion tax hike)
- Increasing taxes on 3.6 million workers by cutting the Low Income Super Contribution ($3.7 billion tax hike)
- Increasing taxes by on Australia’s largest employers and double taxing Australian shareholders through the company tax levy ($4.4 billion tax hike)
- Increasing interest withholding taxes ($400 million)
Hockey has also confirmed more than 100,000 companies will lose the loss carry-back tax offset, ripping $900 million out of the economy.
Hockey has confirmed there would be a $400 million hit on the car industry by removing the accelerated depreciation for motor vehicles.
According to the Institute of Chartered Accountants in Australia,tax compliance is costing the 1.7 million Australian businesses in the small to medium sector $18.4 billion every year.
“This is about 1.2 per cent of GDP and 14 per cent of total tax revenue collected by the Commonwealth,” said the Institute’s Head of Tax Policy, Michael Croker. “We are recommending a range of tax changes, which would give a much-needed boost to Australia’s small businesses,” said Mr Croker.
In a submission to the Board of Taxation’s request for input on tax impediments facing small business, the Institute identified major tax changes that could be considered as part of the federal government’s promised White Paper on Tax Reform, as well as ideas that could be considered now.
“Small businesses already enjoy a range of tax concessions, which are justified for a range of reasons,” Mr Croker said.
“The contributions that small business makes to economic growth, competition and job creation are the most obvious reasons, and tax law also recognises the disadvantages of being small, particularly disproportionately high compliance costs.
“Our latest tax research confirms that business size remains the single most significant predictor of tax compliance costs. The results indicated that the average gross tax compliance cost for small to medium businesses is about $11,000 per firm per year. This is a significant increase since the last major Australian study of tax compliance costs in 1995. Less than half of this increase is accounted for by the introduction of the GST.”
Meanwhile, rents not wages are impacting on most small businesses bottom line. So it is in the interests of Australian small business that government adopts policies that reduce land prices and hence dampen exorbitant rental charges. The application of Land Value Taxation in lieu of burdensome taxes like Payroll Tax and the GST would boost general prosperity, take the profits from idle land speculation and justly re-direct them into the pockets of workers, and genuine entrepreneurs alike.
Other government policies should address employee turnover, small business financing costs and red tape, marketing costs, and better affordable access to new technologies.