The Treasurer and Minister for Small Business today announced that the Government will introduce legislation to standardise the eligibility criteria for small business tax concessions from 1 July 2007.
Separate eligibility tests currently exist for GST, the Simplified Tax System, capital gains tax (CGT), fringe benefits tax (FBT) and pay-as-you-go (PAYG) small business concessions.
As a result of today’s announcement, any business with annual turnover of less than $2 million will be able to access any of these concessions.
Small businesses will only have to apply one eligibility test to access a range of small business concessions. This demonstrates again the Government’s commitment to reducing red tape and compliance costs for small businesses.
This proposal incorporates and goes beyond the package of measures to assist small businesses announced in this year’s Budget.
Small businesses meeting the $2 million annual turnover test will not need to make any further decisions to enter into the new arrangements, nor will they be obliged to adopt any concessions not suited to their requirements. Any business meeting the new small business definition will be able to choose those concessions that meet its business needs.
A single definition of small business will result in reduced compliance costs for some 2 million Australian small businesses, or 96 per cent of all Australian businesses.
Businesses with existing access to CGT, FBT or PAYG small business concessions will not lose out under the new arrangements. Those benefits will apply to businesses that meet the new small business definition or that meet other existing eligibility criteria.
The measure will apply from 1 July 2007. The Government will be consulting publicly on the draft legislation in early 2007.
Today’s announcement represents further cuts in tax of $150 million to small business, bringing the total cost of aligning the definition of small business in tax laws to $277 million.
The most significant change is the extension of the Entrpreneurs’ Tax Offset from businesses with a $50,000 turnover to those turning over up to $2million.