Small business urges treasurer to rethink scrapping of tax breaks

http://www.theguardian.com/world/2013/oct/02/small-business-lost-tax-breaks

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The small business lobby has said it will be putting pressure on the treasurer, Joe Hockey, to abandon plans to scrap several key tax breaks, warning that the sector’s traditional support for the Coalition can’t be taken for granted.

The peak organisation representing Australia’s 2.5m small businesses has reacted with dismay at the Coalition’s pledge to ditch an instant asset tax write-off, as well as scrapping the ability for firms to carry back losses incurred during the financial year.

The asset tax write-off, which was recommended in the Henry tax review, allows firms to claim a tax deduction on items purchased up to $6,500. The accelerated depreciation scheme for cars, which allows a company to claim an immediate $5,000 deduction for a vehicle costing $6,500 or more, will also be cut.

The loss carry-back initiative enables losses incurred by a business in the current financial year to be offset against tax already paid in previous, more profitable years, up to $1m. The Coalition said that the scheme was an “inadequate substitute” for Labor’s failure to deliver a promised company tax cut.

Hockey revealed that the schemes would go in a $31.6bn savings package announced shortly before the election. The Coalition said that business incentives attached to the mining tax and carbon pricing, both of which are set to be dismantled by the new government, will also go.

However, peak body the Council of Small Business of Australia (Cosboa), said it will be meeting with Hockey in the coming weeks to urge him to change his mind about discontinuing the tax breaks.

“We are confident on that because Joe says he understands small business and that he comes from that background,” Peter Strong, executive director of Cosboa, said. “We will certainly let him know we are here. The decision to get rid of those items is disappointing. People liked them, they were easy to understand we will be saying to Joe: ‘Leave them there – getting rid of them will be bad for business.’”

“The government really needs to look at the impact this will have on people. They need to give small businesses certainty because it gets very confusing for small businesses if things change all the time.”

The small business vote has traditionally leaned in favour of the Coalition, with polls conducted prior to the election suggesting strong support for the conservatives, but Strong said that this backing was conditional.

“The Coalition has been very strongly pro-small business and it was only shortly before the election that Joe came out with his statement and that pegged them back a bit,” Strong said.

“The demographics of small business has changed a lot in the last 20 years, there are a lot more swinging voters. Small businesses wanted confidence and stability and that’s why they voted for Abbott, due to Labor’s leadership troubles. But they will be judged now they are in office.”

Bruce Billson, the small business minister, told Guardian Australia that the scrapping of the tax breaks was part of an election commitment to improve the budget situation.

“We have been faced with quite a task in getting the budget back on track and we were up front and frank with people about what we’d do about that,” he said. “The mining tax hasn’t brought in anywhere near the revenue expected.

“The best piece of tax support we can provide small businesses on tight margins is remove the carbon tax, as well as not implement the Labor change to fringe benefit tax on cars, which saw some companies virtually wiped out. Once the budget situation improves, we will look at further measures to help small businesses. But we have to live within our means.

“It’s wrong to assume that small businesses will always support us. But since 2007, the small business community woke up to the fact that Labor talked a good game but were found wanting in terms of implementation. They want a different approach and I want to work as hard for small business success as small business people do themselves.”

Strong said that he supported other areas of Coalition policy, such as reviewing contract law, which he claims is weighted in favour of large companies, and reducing the burden of regulatory compliance.

“Bruce Billson is in there now and he’s very good, very well respected,” Strong said. “He gets small business in a way most don’t because he’s been there himself as a business owner. He understands we are people, not businesses.”

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