Small and medium businesses are being promised cash flow boosts this year to help them with the post-pandemic recovery, and easier paperwork within two years in a budget pledge the government says will save hundreds of millions of dollars.
Treasurer Josh Frydenberg is promising changes to the way business tax bills are calculated, meaning regular instalments would be calculated based on the previous year plus 2 per cent instead of the 10 per cent that would be added under current legislation.
Treasurer Josh Frydenberg is promising to help small businesses improve their cash flow.Credit:SMH / NCA Pool Picture
If a business earns more than the amount calculated, it would have to pay the extra tax owed at the end of the financial year.
The government estimates changing this “uplift” rate means 2.3 million small and medium businesses and sole traders will keep an extra $1.85 billion throughout the year.
The change has to be legislated before businesses will see any benefit. This would likely be after the May election, given there are only two sittings days with both houses scheduled before then, but the government is confident it can be done before the next financial year starts in July.
Mr Frydenberg will also announce on Wednesday a proposal for a new tax office IT system to calculate small business tax instalments based on real-time information about current financial performance, taking into account events such as natural disasters.
It will also allow pre-filling of more data, including tax returns and business activity statements, automate online reporting, and allow businesses that pay excise, such as small brewers, distillers and oil importers, to do so less frequently.
Most of the red tape measures are anticipated to be in place by the end of 2023.
Mr Frydenberg said small and medium businesses employed millions of Australians and the government was seeking to free them up to invest and innovate, estimating the changes would save them $800 million a year in compliance costs.
“That’s why, as part of our plan for a stronger economy and a stronger future, the Morrison government is slashing red tape, freeing up cash flow and ensuring SMEs spend less time buried in paperwork,” he said.
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