Tradespeople and small construction businesses have emerged as key winners in a Budget which also delivers a strong infrastructure spend and a plausible path to surplus.
As the Government tries to put the nation on a sustainable pathway of economic growth, Federal Treasurer Joe Hockey on Tuesday announced a $5.5 billion growth package aimed at stimulating small business and entrepreneurship throughout the country.
Under the changes:
- Incorporated businesses (i.e. companies) with a turnover of less than $2 million will receive a 1.5 percent cut in the company tax rate from 30 percent to 28.5 percent.
- Unincorporated businesses (sole traders, partnerships etc.), which include the majority of tradespeople and many sole traders within the construction sector, will receive a 5.0 percent ‘tax discount’ on tax payable on their business income.
- For the next two years, all small businesses will receive a full and immediate tax deduction for any individual assets they purchase up to a value of $20,000 (up from $1,000). This measure ends on June 2017.
Meanwhile, the Government has also maintained its record on infrastructure investment, unveiling a new $5 billion Northern Infrastructure Facility to provide large concessional loans for the construction of ports, pipelines electricity and water to a range of projects in Queensland, Western Australia and the Northern Territory.
The Budget also continues spending on major road upgrades including the $5.6 billion Pacific Highway Duplication, the $6.7 billion upgrade to the Bruce Highway and the Perth Freight Link (see below).
On training, it delivers $331 million to help disengaged youth become job ready but strips $131 million from existing training and education programs.
Importantly also, it appears to deliver a sustainable path to fiscal responsibility, with the deficit set to fall from $35.1 billion in 2014/15 or 2.0 percent of GDP to $6.9 billion or 0.6 percent of GDP by 2018/19.
Charting such a path is seen as crucial in promoting confidence in investment in Australia and therefore investment in property and construction as it reduces the ‘sovereign risk’ associated with investment in Australia.
Hockey says the value of the small business measures cannot be understated.
“If you run a café, it might be new kitchen equipment, or new tables and chairs. If you’re a tradie, it might be new tools or a computer for the home office,” Hockey said, referring to the immediate tax write-off.
“Cars and vans, kitchens or machinery … anything under $20,000 is immediately 100 per cent tax deductible from tonight.”
Building industry lobby groups applauded the measures.
“There are more than 300,000 small businesses (more than any other industry) in the building and construction industry who are winners from the Budget,” Master Builders Australia Chief Executive Officer Wilhelm Harnisch said.
“Master Builders called for a Budget to boost confidence and viability for business in the here and now and the Government has delivered.”
Housing Industry Association Chief Executive of Industry, Policy and Media Relations Graham Wolfe said the Budget delivered a welcome injection to the small business sector.
“The $5.5 billion ‘Growing jobs and small business package’ provides important support to a wide-ranging group of small businesses in the residential construction industry,” Wolfe said.
Key infrastructure commitments
- $5 billion for ports, rail, pipes and power stations in a new Northern Australia fund
- $3 billion still set aside for Melbourne’s East-West Link, despite Labor government opposing it
- $5.6 billion Pacific Highway duplication (NSW)
- $2.9 billion Western Sydney infrastructure plan (NSW)
- $6.7 billion Bruce Highway upgrade (Qld)
- $500 million Ballarat to Stawell Western Highway duplication (Vic)
- $925 million Perth Freight Link (WA)
- $500 million Darlington Interchange (SA)
- $400 million Midland Highway (Tas)