Budget bonus for SMEs

Federal Treasurer Wayne Swan seems intent on giving away all the good news before tomorrow night’s official unveiling, which either means the budget is going to have some bad news in it or very few new measures.

You’ll have to wait for tomorrow’s special SmartCompany budget bulletin live from Canberra to find out, but for now we’ve got to say that yesterday’s announcement of a $5,000 tax deduction for new car purchases by small businesses is pretty good news.

While the new tax break comes at the expense of the entrepreneur’s tax offset, which will be scrapped at a saving of $365 million ($350 million will be pumped back into the new tax break) most experts say the ETO was confusing and a little too targeted to very small businesses.

The new tax deduction appears to be very simple to understand and will be open to a wider variety of businesses – the car tax deduction is available to businesses with less than $2 million in turnover, while the ETO was only available to businesses with less than $70,000 in turnover.

While not everyone will be pleased with the decision – I could imagine some home-based business owners who have no intention of buying a car may find they are suddenly missing out – it would appear from ATO statistics that average claims under the ETO were in the hundreds of dollars.

On the other hand, a $5,000 car tax deduction for a company car is likely to make a pretty big difference to an investment decision. That could be the difference between putting another sales person on the road or not.

While we have to wait until tomorrow to find out what nasty surprises Swan might have in his budget for small business, at this stage we’ve got to say that it’s good that the Government has at least recognised the “small business operators are doing it tough in our patchwork economy,” as Swan said yesterday.

Of course, we should point out that the new car tax deduction doesn’t kick in until 2012-13, so the relief is hardly immediate.

Indeed, no doubt the Government would join those “small business operators” hoping that the “patchwork economy” is well and truly back on track by July next year.