Small business win in Henry review

Small to medium enterprises will benefit from the federal government's plans to lower the corporate tax rate to 28 per cent and provide an immediate tax deduction for assets that are less than $5,000.


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A corporate tax cut is not a real tax cut. Due to Australia's dividend imputation system, corporate tax cuts are of no benefit to Australian shareholders. Any tax cut results in shareholders having to pay more tax on dividends, producing the same result to shareholders as no change in corporate tax. Foreign shareholders of Australian companies do benefit, however. It is also incorrect to label Australia's corporate tax as one of the highest in the OECD. With dividend imputation, Australian shareholders do not pay double tax on dividends. Most other countries impose a tax on dividends without the benefit of dividend imputation. This is effectively double taxation on corporate profits. Full accounting of corporate and personal taxes with dividend imputation makes Australia one of the LOWEST corporate tax regimes in the OECD. The lobbying by some groups to eliminate dividend imputation would require the corporate tax rate to be reduced to ZERO, for the elimination of dividend imputation not to be an increase in total tax paid on corporate profits once the shareholders are considered. Or aren't shareholders important? Private company shareholders need dividend imputation. The announced corporate tax reduction is a Clayton's reduction

The reduction to 28% albeit better than a kick, is not an incentive or motivation from the current rate. The $5,000 asset write off is only beneficial if there is acquisition, and most small businesses do not acquire assets often to take advantage of this, and the amount is again, better than a kick but no big deal. Increasing the turn over to $5,000,000 will only add a small percentage of the businesses as most of small businesses are within the $2M turnover. The proposal of carrying back revenue losses is expediting the deduction by 12 months which would be helpful, but only if the previous year had a reasonable gains. Overall Henry's review is equivalent to throwing crumbs to a starving man, not sufficient to satisfy him and not necessarily make him Henry's friend, which seems to be the underlying purpose of the exercise rather than actually providing something meaty that is useful for the future growth of small businesses.

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