Newspaper article The Observer (Gladstone, Australia)

Drop in Company Tax Rates No Benefit to Small Business

Newspaper article The Observer (Gladstone, Australia)

Drop in Company Tax Rates No Benefit to Small Business

Article excerpt

COMPANY tax is now not going to drop to 29% and this has caused a lot of uninformed comment about the effect on small business.

The reality is that most small businesses do not work through a company structure a they tend to be sole traders or in partnerships. But, even if they did work through a company, a cut in the company tax rate from 30% to 29% is not going to compensate them for the extra cost of compulsory superannuation going to 12%.

Suppose a business uses a company structure and has a gross income of $500,000. From this, deduct general running costs of $100,000 and wages of $300,000. Under the present system, compulsory superannuation would add 9%, or $27,000, to the wages bill, bringing total expenses to $427,000.

This will leave the company with a profit of $73,000 on which company tax at 30% would be $21,900, leaving a net profit after tax of $51,100 for the shareholders.

If compulsory superannuation rises from 9% to 12%, and all the other figures remain unchanged, the superannuation bill would rise to $36,000, and reduce the pre-tax profit from $73,000 to $64,000. …

Author Advanced search

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.