What the 2012 Federal Budget means for your bottom-line.
Federal Treasurer Wayne Swan has confirmed the pre-budget proposal to reduce the company tax rate by one per cent will no longer go ahead. Mr Swan also indicated that the budget will return a modest surplus of $1.5 billion for the 2012/2013 financial year, but the budget deficit will reach $44.4 billion for the 2011/12 financial year.
What are the downsides?
Although it’s commendable the Federal government has predicted it will be able to achieve such a significant reversal to the Commonwealth budget, measures announced tonight favour households over business.
CommSec Economist Savanth Sebastian says, “No new measures were announced that help to close the divide between the two speed economy. In particular, the decision to leave the company tax rate unchanged will be a disappointment to the business sector”.
Keeping the company tax rate unchanged is expected to increase cash receipts by $4.6 billion over the five years to 2015/16, a figure that includes a reduction in receipts from the unwinding of the associated growth dividend.
Who are the winners?
Small businesses will benefit from the introduction of a new initiative that will allow them to carry back losses against previous revenue to receive a refund against previously paid tax. As companies will be able to carry back up to $1mn of losses each year, providing a benefit of $300k. This measure should help those companies facing headwinds in the economy see through challenging periods, and provide much needed funds to retain staff and invest to improve productivity and grow.
What this means
Overall, the government has taken the decision to reduce or delay spending to be able to return the budget to surplus. The contraction of fiscal policy, however, could set the stage for future interest rate cuts, which would benefit small businesses, although this is by no means a given.
Although this year the government has left the company tax rate unchanged, this is an issue that will need to be revisited in future years, given Australia’s company tax rate is higher than many other developed nations.
Want to know more?
For a full breakdown of how the 2012 Federal Budget will impact your business, or industry, visit our dedicated Federal Budget website this morning for expert analysis of all the major decisions and key sectors impacted by last night’s budget.
Watch our experts opinion on these key budget areas: