There is much current debate on whether small business should receive a 1% tax cut, and the benefit to small business.
So what is the true value of this benefit? Firstly, you may not even be eligible for any benefit.
If your business is not in a company structure then you get no benefit at all. Only a third of small businesses are.
Next your business only gets a benefit if it currently pays tax. Only half small businesses pay any tax (as opposed to their owners who generally draw wages from the business and are taxed on those wages).
Finally, if your business has a company structure, and you have a taxable profit, the increase in dividends you might withdraw from the business due to a fall in company tax rate from 30 to 29% will then be taxed at your normal rate, and unless your marginal rate is less than 30%, you won’t receive any benefit.
The only benefit will be if the funds remain in the business. These funds could of course be used for additional capital investment but we are talking about an amount of 3% of NET profit. So if a business turned over $1 million and had a 10% net profit and met all the conditions above, the additional funds available would be around $3000 or 0.3% of turnover. Let’s Party!
How does that compare with your costs of complying with government regulation?
The Bard as always says it best: Much ado about nothing.
May Your Business this Year be - As You Plan It.
Over to You. What do You Think? Post Your Comments Below.
Dr Greg Chapman is the Director of Empower Business Solutions and The Australian Business Coaching Club and is Australia's Leading Advisor on Emerging Businesses and provides Coaching and Consulting advice to Australian Small Business Owners in Marketing & Business Strategies Planning & Systems. He is also the author of The Five Pillars of Guaranteed Business Success and Price: How You Can Charge More Without Losing Sales.
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