The Coalition has chosen a thrilling aspiration. They have committed to increase the number of small businesses in Australia by 350,000 over the next four years. Last month, coalition leader Peter Dutton launched this plan as a way to shore up confidence from independent entrepreneurs. Equity Arguments It loosens the barrier of entry for prospective new business owners. The NEVI proposal comes at a pivotal moment. Recent conversations underscored the obstacles that small businesses must overcome, underscoring the importance of these small businesses to the Australian economy.
Dutton emphasized that the plan would help “restore confidence, save time and cut costs,” providing a much-needed boost to aspiring business owners. Australia is home to over 2.5 million small businesses today. The Coalition’s goal is to get many more Australians following in their footsteps and making that exciting leap to pursue their own opportunities.
Tax Incentives for New Start-Ups
The plan would provide qualifying new businesses with a stackable series of graduated tax offsets. These incentives will go a long way toward allowing them to reinvest during their critically important early years. More specifically, new start-ups would only start paying tax on 30% of their income during the first three years of operation.
In the first year, companies will be taxed on only a quarter of their first $100,000 earned. They’ll likewise get hit with a 50 percent marginal tax rate on the next $100,000 they make. That’s where it gets interesting, because the second year, the model flips. Businesses will be taxed on 40 percent of their initial $100,000, and on 60 percent of the subsequent $100,000.
Companies making permanent improvements with a cost basis of $4,000 or greater would qualify for a tax deduction of $2,000. These measures are aimed at giving small businesses the financial flexibility that will help them grow and create more jobs.
“Today, I say to small business owners and employees, help is on its way,” – Peter Dutton
Eligibility Criteria and Impact on Workers
In order to be eligible for these new tax incentives, firms have to identify themselves as small businesses. This requires them to employ fewer than 20 staff and have an aggregated turnover of less than $10 million. This targeted approach is meant to focus the benefits on those with the greatest need.
Yet, the first iteration of the proposal hasn’t been without serious criticism. The Productivity Commission had pointed out that under the Coalition’s plan—known as the “Freedom of Choice” plan—most workers would be thousands of dollars worse off. Murray Watt, Labor’s transport spokesperson, pictured above, has been calling for workers to be compensated fairly for weekend work. He’s cautioning against the potential pitfalls in the Coalition’s plan to make that happen.
Around one in three Australians-roughly 3 million-are covered by these awards, which dictate minimum wages and working conditions. Therefore, any harm they do to small businesses will reverberate throughout the economy and hurt workers everywhere.
Financial Implications for Government and Small Businesses
The Liberal Party has costed their four-year plan to introduce these two policies at approximately $330 million. The Coalition sees this investment as a way to generate new economic activity. It will further boost job creation by making our communities a cradle of innovation among small firms.
Their entrepreneurship accelerator scheme, designed to lessen the acute burden of up-front costs, is equally impressive. It further encourages the broader confidence of would-be entrepreneurs. The Coalition is driven by a desire to equip and inspire more Australians to take the leap into entrepreneurship. They’re doing this through reducing barriers to entry, including with tax offsets.
