Small businesses will receive $720 million of cash-flow relief from the Rudd Government’s proposed cut to pay-as-you-go (PAYG) instalments. Self-funded retirees
Small businesses will receive $720 million of cash-flow relief from the Rudd Government’s proposed cut to pay-as-you-go (PAYG) instalments.
Self-funded retirees and small superannuation funds will also benefit from the tax break, which aims to alleviate the impact of the global recession.
The initiative – announced over the weekend – aims to reduce PAYG instalments for approximately 1.5 million taxpayers throughout 2009-10.
In a move to support jobs, the otherwise over-payed tax collections will be at the disposal of those most affected by the downturn.
The plan is to cut quarterly PAYG instalments for the 2009-10 income year for taxpayers whose instalments are adjusted for the previous years’ gross domestic product (GDP) growth.
The government will use the expected increase in the Consumer Price Index for 2009-10 instead of the previous years GDP growth to calculate tax payments.
Treasurer Wayne Swann says the system will better align the tax treatment of small businesses, self-funded retirees and small superannuation funds with the changing economic outlook.
It will also prevent businesses – which are the backbone of the economy – from paying too much tax.
The Government plans to reduce the GDP adjustment from 9 percent to 2 percent in an attempt to match it with the Consumer Price Index.
This will result in cash-flow benefits to around 1.5 million taxpayers, cutting taxpayer PAYG instalments by 6 percent.
This will ensure that their PAYG instalments more closely approximate their actual income tax liability for the year.
Those business owners who pay their GST quarterly will also benefit. The Commissioner of Taxation has advised that he will use the 2 percent adjustment factor when he calculates GST instalments.
However, the reduction does not apply for taxpayers who calculate their instalments based on the rate notified by the Australian Taxation Office, as these will automatically adjust.