The 2014 Federal Budget has delivered significant changes for small and medium enterprise (SME). Let’s find out how the changes may affect your business.
When it comes to unfair contracts imposed by big business, small business will get the same protection as consumers. The government will provide $1.4 million to extend unfair contract relief from consumers to small business.
Lower company tax rate
The government confirmed it will cut the company tax rate for small and medium businesses by 1.5 percent to 28.5 percent from 1 July 2015, benefiting around 300,000 small businesses that use a company structure for tax purposes. These businesses will not be hit with the 1.5 percent levy used to fund the paid parental leave scheme, meaning they will receive some small but much needed business tax relief.
The unfreezing of the fuel excise levy will lead to an increase in petrol prices twice a year, adding about two cents a litre to the cost of petrol from August 2014. The increase is likely to hurt business owners who are heavily reliable on petrol.
Whilst the lower company tax rate will provide some relief for small business owners, if you travel daily for business, the fuel excise levy will add up over the long run.
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New incentive payment for hiring over 50’s
With the retirement age set to increase to 70 by 2035, small business stands to gain the most from taking up a new $10,000 incentive payment encouraging employers to hire people aged over 50.
The package is a phased-in system which will initially offer business $3000 to hire over-50’s who have been out of work for six months or more. A further $3000 will be given for keeping the staff member employed for 12 months, followed by another $2000 for 18 months, and a final $2000 if businesses employ mature-age workers for two years or more.
Deficit Levy for high income earners
A deficit levy of 2 percent will apply to taxpayers who earn over $180,000 per annum. The levy is set at 2 percent of total income from July 2014 to July 2017.
While $180,000 might be a high salary, the change is set to affect those small businesses operating as partnerships or as sole traders – for example, husbands and wives, or two friends who run a business together and re-invest their profits into their business.
Compulsory superannuation contributions will rise from 9.25 percent to 9.5 percent from 1 July 2014. They will be frozen at 9.5 percent until June 2018 when they will rise by 0.5 percent each year until they reach 12 percent.
What are your thoughts?