Small businesses will receive tax relief as they struggle to cope with weakening demand brought on by recession, the federal government has announced.
Construction companies will also benefit from measures unveiled in the 2009/10 budget, including a three month extension of the government’s boosted first home owners scheme and a long-term $22 billion spending commitment on roads, rail and ports.
The Small Business and General Business Tax Break will be increased from 30 per cent to 50 per cent for small businesses, the government said on Tuesday.
The 50 per cent deduction will be available on new capital worth $1,000 or more, such as vehicles, purchased between December 13, 2008, and December 31 this year.
The eligible items must be installed and ready for use by December 31, 2010.
“Small businesses are the engine room of the Australian economy, accounting for around 95 per cent of all businesses and around 50 per cent of the all private sector employment,” the government said in the budget papers.
“This will further help them to invest, bolster economic acidity and support Australian jobs.”
The tax deductions will come at a cost of approximately $141 million to the government.
Federal Treasurer Wayne Swan said the government’s plan to spend $22 billion on roads, rail and ports infrastructure would also benefit business, resulting in “35,000 buildings sites springing up around the nation.”
Its high speed national broadband network, which is still in the very early stages of planning, was also highlighted as a positive for small businesses, providing up to 37,00 local jobs at the peak of construction.
Construction companies will derive some benefit from an extension of the government’s boost to first home buyers grants.
Since October 2009, first home buyers have received an extra $7,000 when purchasing an established home, and an extra $14,000 for new homes, on top of the $7,000 provided under the first home owners scheme.
The boosted grants were due to end on June 30, but will now apply for homes purchased on or before September 30 this year.
The boosted grants will then be phased down to an extra $3,500 for established homes and $7,000 for new homes up to December 31, 2009.
After that point the $7,000 first home owners scheme will continues in its original form.
“This extension will continue to stimulate housing activity, support the construction industry and assist first home buyers to enter the housing market,” the government said.
The Australian Chamber of Commerce and Industry (ACCI) says there isn’t much relief for business in the budget.
The government is walking an economic tightrope “on a risky, high-wire act, albeit a calculated risk” and was pinning the recovery on being very short, ACCI’s Chief Executive Officer Peter Anderson told reporters.
“The major weakness in this budget is its failure to apply substantial discipline to commonwealth spending to rein in the deficit in the event that the recession is longer or deeper than the budget forecasts.”
If the recession is short, then the budget may work, he said.
Business did welcome the $22 billion investment in infrastructure together with the investment allowance being extended for small business, Mr Anderson said.
“But on the negative there is very little in the way of sustainable relief in the costs of doing business.”
Meanwhile, Australian Industry Group chief executive officer Heather Ridout said the budget was supportive of the economy during tough times.
It was also pressing the re-set button in a number of key areas including infrastructure, education and health which supported industry, she said.
“Just generally we think it’s an important budget,” she said.
The Business Council of Australia (BCA) welcomed the budget’s focus on education, training and infrastructure investment, but called for “aggressive” economic reforms and tough future budgets to return the country to surplus.
The government must be on “permanent deficit watch”, BCA chief executive Katie Lahey said.
“Tonight’s budget confirms Australia’s taxing and spending have been out of balance for some time,” Ms Lahey said.
“We became far too reliant on corporate taxes, and far too relaxed about new spending.
“We need sustained fiscal discipline 365 days of the year, every year until we are back in the black, not just in the weeks leading up to the second Tuesday in May.”