NO.019

TAX CUT FOR SMALL BUSINESSES

The 25 per cent Entrepreneurs’ Tax Discount passed by the Parliament

yesterday is expected to deliver a benefit to 540,000 Australian small businesses.

The discount allows businesses operating in the Simplified Tax System a 25

per cent discount on the income tax in respect of their business income.

Businesses with turnover up to $75,000 will benefit, while those with turnover

of $50,000 or less able to claim the maximum 25 per cent.

The maximum possible benefit depends on the amount of tax that would otherwise

be paid.

For example, if a company has a turnover of $50,000, the maximum tax it would

pay would be $15,000 (ie 30 per cent of $50,000), although this would usually

be reduced by deductions.

• The 25 per cent discount would reduce this tax liability by $3,750, to only

  $11,250.

If the business is not a company, such as a sole trader, then the maximum tax

it would pay on a $50,000 turnover would be $11,172 (ie the application of the

tax free thresholds and lower marginal rates), although again, this would usually

be reduced by deductions.

• The 25 per cent discount would reduce this tax liability by $2,793 to $8,379.

The Entrepreneurs’ Tax Discount is expected to cost $1,160 million over

the next four years.

CANBERRA

17 March 2005

Contact: Amanda Kennedy

02 6277 7340