House of Representatives

Tax Laws Amendment (Small Business Measures No. 1) Bill 2015

Explanatory Memorandum

(Circulated by the authority of the Minister for Small Business, the Hon Bruce Billson MP)

General outline and financial impact

Small business company tax cut

Schedule 1 to the Bill amends the Income Tax Rates Act 1986 to reduce the company tax rate from 30 per cent to 28.5 per cent for companies that are small business entities with an aggregated turnover of less than $2 million.

Date of effect: The amendments apply for the first income year beginning on or after 1 July 2015 and for subsequent income years.

Proposal announced: The measure was announced as part of the 'Jobs and Small Business Package' in the 2015-16 Budget.

Financial impact: In the 2015-16 Budget the measure was estimated to have the following revenue implications:

2014-15 2015-16 2016-17 2017-18 2018-19
Nil -$250m -$400m -$400m -$400m

Human rights implications: This Schedule does not raise any human rights issue. See Statement of Compatibility with Human Rights -paragraphs 1.32 to 1.35.

Compliance cost impact: This measure has been assessed as having a transitional compliance cost of $30 million or $35 per company. A much smaller number of companies close to the large/small business threshold will have an ongoing compliance cost assessed at $35 per company or $200,000 in total.

Summary of regulation impact statement

Regulation impact on business

Impact: The regulatory impact on businesses has been assessed as low.

Main points:

Large businesses will be unaffected by this measure with their tax rates and compliance costs remaining the same as at present.
The vast majority of small businesses will have a transitional cost in amending the tax rate in their tax return procedures but otherwise will have minimal ongoing costs.
A relatively small number of companies with turnover close to the small business turnover threshold will have minor ongoing costs associated with determining their tax status.

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