Australian SME Tax Changes & Tips for End of Tax Year Procedures


Recently, there has been a reform in the tax code for SME’s in Australia. For those companies that are considering going into the Australian market or have existing companies within Australia, it is important to be aware of these taxation changes and the potential implications that they will have on your company. In order to make plans for your business in Australia, carefully consider the conversation below:

Trends in SME Taxation in Australia

Bill Shorten has been widely criticised in Australia for his recent tax increase for small businesses. According to recent statistics, the tax increase will implicate companies that employ at least 1.5 million Australians. The rationale behind the decision was to tax SME’s in order to put more funding towards the healthcare and education sectors. The primary concern with this policy is that SME’s in Australia will have to cut their employment budget, which would negatively impact the job market in Australia. Australia has seen major developments in the start-up sector due to the government’s prior initiatives to allow SME’s to obtain the opportunity required to succeed. Many Australians are concerned that this recent taxation policy will take Australia a step backward and cause a reduction in overall business investment to be able to meet taxation obligations.

Potential Impacts on Companies within Australia

One of the primary issues with the taxation rates in Australia for the SME’s is that they are not allowing Australian companies to be globally competitive. For example, the taxation rates in the UK are 17% and by Australia remaining at 27.5%, it makes it difficult to get ahead. Companies in Australia still want to see the taxation rate drop to 25%, which is still high in comparison to the OECD average of 23%.

Recommendations for End of Financial Year Tax Tips for Australian SME’s

Many SME’s end up paying more taxes than they should by not being properly informed of current taxation regulations within Australia. By investing in a qualified party to review your company’s financials, it is possible that you can avoid many common pitfalls. The following tips are useful to consider as the end of the financial tax year is approaching for Australian SME’s:

Adequately Assess Your Deductions

Make sure that you are deducting even your basic business expenses such as: rent utilities, and repairs. Additionally, if you sought expert advice from a professional services firm, those expenses can also be deducted from your tax return.

Utilize the $20,000 Instant Asset Write-Off

Australia has a unique instant asset write-off where small business owners are able to claim up to $20,000 worth of assets for their business. Any new necessary machine or device that is essential to your business that is within the $20,000 threshold is eligible for this taxation deduction.

Be Informed About Current and Prospective Taxation Changes

It is wise to not only learn of taxation changes when a new law is put into effect. As a business owner, it is your responsibility to be diligent about pertinent taxation and/or regulatory changes relevant to your industry. Be sure that you are regularly reading industry journals and publications about projected changes the ATO is considering so that you are able to be ahead of the curve.

Take Advantage of the Income Tax Offset

If you have a business that is unincorporated, then it is possible that you can utilize the income tax offset to your advantage. If you are eligible for the income tax offset, then you will be able to shed up to $1,000 AUD from your tax bill if you have revenue from your business that does not exceed $5 million AUD. This is targeted at small business owners and entrepreneurs that need that difference in funding, which is why the government has an offset of 8% of tax payable on business income that will eventually increase to 16% in the coming years. If this does apply to your business, it will position you to make key financial strategic growth objectives that will make a substantial business in your company’s long-term profitability

Final Remarks on the Subject

Australia is currently in a difficult political position in that there is a struggle between those citizens that want to see more investment in education and healthcare and citizens who want the government to lower taxes to permit more growth opportunity for SME’s. Given that Australia has one of the highest corporate taxation rates in the world, it is important for the government to find a way to have a balance where Australian companies have a chance to foster entrepreneurship and remain competitive on a global scale. For owners of SME’s, it is important to carefully follow the developments in legislation in order to strategically plan for the best possible outcome while following these periodically changing corporate taxation regulations.