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Your Budget 2017-18

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Stronger growth

To create more and better paying jobs

Delivering for small businesses

The Government is creating the right environment for over three million small businesses across Australia to grow

The results secured by a Government which champions small business:

Delivered Cutting small business taxes from 1 July 2016 by reducing the corporate tax rate to its lowest level in 50 years and increasing the unincorporated tax discount rate.

Delivered Supporting small businesses through introducing the instant write-off for eligible assets costing less than $20,000 from 12 May 2015 to 30 June 2017, helping these businesses purchase assets and grow (this is being extended for an additional 12 months in this Budget).

Delivered Increasing the number of businesses eligible for a range of small business tax concessions with the small business turnover threshold being increased from $2 million to $10 million per annum.

Delivered Abolishing $5.8 billion in red tape, saving business owners time to focus on growing their business.

Delivered Amending section 46 of the Competition and Consumer Act 2010 to better prevent the misuse of market power and help level the playing field for small business.

Delivered From 12 November 2016 small businesses will have the unfair contract term protections previously only available to individuals.

Delivered As part of the National Innovation and Science Agenda, creating the Digital Marketplace to make it easier for smaller businesses to compete for the Government’s $9 billion information and communication technology (ICT) contracts.

Delivered Requiring government agencies to pay invoices for contracts valued up to $1 million within 30 days or else interest must be paid.

Delivered Opening up new forms of financing for small business by legislating the crowd-sourced equity funding framework for public companies.

Delivered Signing export trade deals with China, Japan and South Korea, which is giving Australian businesses greater access to Asian markets and an expanded consumer base.

Delivered Establishing the Small Business and Family Enterprise Ombudsman to provide a strong voice for small businesses.

Backing small business

A strong small business sector means more jobs for Australians and more opportunities to build vibrant local communities across the country

Small business is the engine room of our economy, making up 99 per cent of all businesses and contributing $380 billion to the economy. This Budget continues the Government’s strong record of backing small business to grow and deliver more and better paying jobs.

Easing the tax burden

The Government is committed to reducing the tax burden on small businesses and helping them invest and grow.

Small businesses are reaping the benefits of lower taxation after the Government recently secured tax cuts for around 3.2 million small and medium Australian businesses employing 6.7 million workers as part of its Ten Year Enterprise Tax Plan in the 2016–17 Budget.

These tax cuts begin in 2016–17 for businesses with annual turnover less than $10 million, with the tax rate for companies cut to 27.5 per cent – the lowest level in 50 years. Unincorporated businesses with annual turnover of less than $5 million also benefit from an increase in the rate of the unincorporated tax discount to 8 per cent.

This delivers on tax cuts for small and medium businesses with annual turnover less than $50 million promised for this term of Government in the last Budget.

Over 90,000 additional businesses will gain access to the small business tax concessions as a result of the small business turnover threshold being increased to $10 million per annum.

Further expanding on these small business initiatives, in this Budget the Government will extend the $20,000 instant asset write-off for a further 12 months to 30 June 2018. The turnover threshold will also be lifted to $10 million, five times higher than was originally available.

This measure will improve cash flow for small business, providing a boost to small business activity for another year, helping them to reinvest in their business and replace or upgrade their assets.

Improved cash flow will also give businesses the flexibility to hire more employees and pay staff more.

This chart shows the lowest headline tax rate applicable to companies in each year from 1967 to 2017. The small business corporate tax rate generally increases from 27.5 per cent in 1967 to a high of 49 per cent in 1988. From 1989 to 2014-15, the rate generally falls to a low of 30 per cent. In 2015-16, the rate falls to 28.5 per cent and then falls further to 27.5 per cent in 2016-17. At no point is the rate lower than 27.5 per cent

How tax reform helps small business

Justin owns and operates a carpentry company from three premises employing 10 people. His business has an annual turnover of $7 million and taxable income of $400,000 (excluding deductions for asset purchases). On 1 June 2017, Justin’s company purchases a panel saw costing $7,000, an edge bander for $10,000 and a belt sander for $14,000 (all exclusive of GST) for one of his three premises. On 1 January 2018, his company purchases another panel saw, edge bander and belt sander (at the same prices) for each of his remaining two premises.

Prior to the Ten Year Enterprise Tax Plan, Justin’s company paid tax at the 30 per cent company tax rate and was not able to access a range of small business tax concessions.

After passage of tax cuts as part of the Ten Year Enterprise Tax Plan

As a result of the Ten Year Enterprise Tax Plan announced in the 2016–17 Budget, Justin’s company pays tax at the lower 27.5 per cent tax rate. Justin’s company is now also an eligible small business as it has annual turnover below the increased $10 million turnover threshold and his company can now access a range of small business tax concessions, including the instant asset write-off for assets costing less than $20,000.

2017–18 Budget – Extended $20,000 instant asset write-off

With the $20,000 instant asset write-off being extended for a further 12 months in the 2017–18 Budget, Justin’s company can continue to immediately deduct assets for his carpentry business that are each valued at less than $20,000 until 30 June 2018.

Impact of the Government’s changes

Justin’s company will receive an additional cash flow benefit of around $18,300 in 2016–17 as a result of the lower company tax rate and access to the instant asset write-off. As a result of the 2017–18 Budget measure to extend the $20,000 instant asset write-off, his company will also be around $14,500 better off in 2017–18.

Justin can use the additional cash flow benefit in each of these years to reinvest in and grow his company.

Cutting small business red tape

Removing barriers to businesses creating jobs and growing the economy

Having already reduced the Commonwealth regulatory burden on businesses and the community by more than $5.8 billion, the Government is now strengthening its regulatory reform agenda through reforms that increase competition, productivity and growth.

Cutting red tape will create more and better paying jobs for Australians.

However, States and Territories continue to impose a wide range of regulatory restrictions that prevent small businesses from growing and innovating. These State regulations impede job growth and entrepreneurship.

For example, many small trucking businesses struggle to master all the different regimes they must comply with when they cross State borders. And it can take up to 18 months to set up a café because of local council regulations.

Through its National Partnership on Regulatory Reform, the Government will therefore provide up to $300 million to States and Territories that remove unnecessary regulatory barriers.

For example, the Government could reward a State or Territory for reducing unnecessary land-use planning restrictions on how a small business owner must fit out their shop. The Government would also reward those States and Territories that remove restrictions on competition as recommended in the 2015 Competition Policy Review.

These incentive payments will cut red tape, boost economic growth and help create more and better paying jobs.

The Government’s efforts will build on the National Competition Policy reforms that helped Australia transform its economy and sustain 26 years of continuous economic growth.