Budget comment from Crowe Horwarth.
Corporate rate cut
For business the centrepiece of this budget is the fact that the Government has confirmed it is committed to cutting the company tax rate by 1.5 percentage points (to 28.5%) from 1 July 2015. For large companies, the reduction will offset the cost of the Government’s 1.5% Paid Parental Leave levy.
The budget papers indicate that up to up to 800,000 small and medium sized companies will obtain a net boost to profitability as a result of this measure. Our experience is that many smaller businesses pay out profits at year end as dividends and as individual tax rates will have increased, not only will this tax cut prove illusory, owing to the increase in “top up” tax they will be in a worse position than in previous years.
For those businesses that are in a position to re-invest profits into the business as working capital this change may be seen as a benefit. However, when viewed in the context of the repeal of the $6,500 instant asset write-off (see below) any net benefit is very minor indeed.
The re-introduction of the indexation of petroleum products excise
The re-introduction of the indexation of petroleum products will increase fuel at petrol bowsers by about 1 cent per litre every year for the next four years. This will feed into the operating costs of all businesses in Australia to some extent.