Forget the spin… small business was stiffed in last night’s Federal Budget.
The promised 1% cut in company tax has been ditched and the proposed tax claw back on losses incurred next year is a pretty poor replacement. Remember this time last year the promised tax cut was sold to us as compensation to small business to help fund the proposed rise in compulsory superannuation.
So the tax cut is gone but the increased super payments are still scheduled to start in 2013.
This morning on Sunrise I put this to the Prime Minister and sought a guarantee that the extra super payments would be delayed until a tax cut was delivered. Suffice to say I didn’t get the guarantee.
The Government says their hands are tied. They wanted to deliver the tax cut but the Opposition (because they disagree with a mining tax) and the Greens opposed it.
If the Gillard government was serious about handing down the tax cut recommended by the Henry review then they would have passed it in the same swathe of legislation they slugged the miners with in March.
In fact, the Henry review recommended as much as a 5% reduction in the corporate tax rate for the small businesses sector.
But no, they wouldn’t dare risk MRRT package, it was worth too much and had too much political credibility riding on it.
To only now turn around and blame it on the opposition is just political side play. The government knew this measure wouldn’t go through months ago, they’ve only just told us now.
Or, maybe, the tax relief for small businesses was never actually on the cards? After all, small businesses don’t vote.
Sure, it’s not all bad for the sector as the tax loss carry back provision and asset write off allowance provides some welcome relief. But even here there are some serious limitations.
The ability to offset current year losses against tax overpaid in previous periods will only kick in next financial year. How many small businesses will be making a profit big enough this year to make it work for them? Not a great deal by my reckoning.
Not only that, but the scheme has a limited life of the next two years so if you want to take advantage of it you better start producing a profit for this financial year and engineering a loss next financial year to get the tax back.
As with every budget small businesses must take the good with the bad. But to get duped on such a publicised and prudent policy for the benefit of buying a few votes sure leaves a sour taste in the mouth.