AUS: A Better Deal On Business Tax

21 September 1999 A141/99

AUS: A Better Deal On Business Tax For Country Australia

In a crucial boost for country Australia and small business, major tax reforms announced today will enhance vitally important accelerated depreciation provisions and slash capital gains tax, the Deputy Prime Minister and Minister for Transport and Regional Services, John Anderson, said.

"The Government has listened to the concerns of rural and regional Australians and put their interests at the forefront in a tax reform package that is good for small business and the bush," Mr Anderson said.

"I believe the innovative New Business Tax System package unveiled today by the Treasurer, Peter Costello, will be seen as a major boost for existing businesses big and small and will help new businesses develop where they are needed most - in our country areas and regional centres.

"The package will entrench Australia's emerging international reputation as a secure and attractive place to do business.

"The new Simplified Tax System that applies to all small businesses with a turnover of less than $1 million will dramatically reduce paperwork and compliance burdens and give them exclusive access to enhanced accelerated depreciation.

"The cuts to capital gains tax promise to provide a real break for all small businesses and individual investors in country areas. Reducing the burden of taxation on capital has been a long standing objective of the National Party and I am delighted with the result."

Mr Anderson said one of the highlights of the package was that all primary producer-specific tax concessions had been retained - as the Government promised they would - and virtually none of the gains to farmers under the GST package had been eroded.

Mr Anderson said he was particularly delighted with the changes to venture capital investment.

"The lack of access to venture capital is often cited to me as a major drawback by bush businesses wishing to attract new investment or see new infrastructure developed. These changes will go a long way towards rectifying that situation."

Mr Anderson said the Government had also heard business concerns about trying to adjust to changed business taxation arrangements at the same time as implementing the GST and decided to defer implementation of major aspects of business tax reform until 1 July 2001.

The main points are:

Capital Gains Tax For all small businesses, up to 75 percent on any capital gain on active assets will be exempt from Capital Gains Tax, with the remainder subject to expanded and simplified rollover provisions and retirement exemption provisions; Small business taxpayers will be eligible for a 50 percent cut in their tax liability on the capital gain from the disposal of active assets. When replacement assets are bought the remaining tax liability can be deferred, or if the proceeds are used to fund retirement then up to $500,000 of the remaining gain will be CGT exempt; Taxpayers who have held assets for a long time (and intend to retire or have become incapacitated) will benefit from their business assets being exempted from CGT where those assets have been continuously held for 15 years or more; For individuals, only 50 percent of capital gains will be taxed, meaning an effective maximum rate of tax of only 24.25 percent (compared to 48.5 percent at present); Encouragement for venture capital industries through concessional treatment of investments by overseas pension funds and Australian widely-held superannuation funds through a Pooled Development Fund.

Accelerated depreciation

New arrangements apply for small businesses with a turnover of less than $1 million; From 1 July 2001, assets costing more than $1,000 with effective lives of less than 25 years will be able to be included in a pool and depreciated at a rate of 30%, while assets costing less than $1000 can be written off immediately.

Entities taxation

Trusts, life insurers, cooperatives and limited partnerships will be taxed like companies but the new regime will not commence until 1 July 2001, giving businesses time to adjust as necessary;

Taxing cooperatives like companies does not involve abolishing the concession that allows a deduction to eligible cooperatives for principal repaid on certain loans; The proposal announced in ANTS to impose fringe benefits tax on such benefits where they are not subject to income tax will not proceed.

General points

All primary producers specific tax concessions have been retained; More than 75 pc of small businesses will no longer have to do an annual stocktake of assets; The company tax rate will be cut from 36 percent now to 34 percent in 2000-01 and 30 percent in 2001-02; Prior to the introduction of the Simplified Tax System, small businesses will be able to continue to claim existing concessions such as accelerated depreciation; Unincorporated farm businesses will benefit from July 1 next year through personal tax cuts already legislated in Parliament; 99 percent of primary producers will keep their access to accelerated depreciation, at the same time as the compliance burden is dramatically simplified.

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