*** Embargo until delivery *** Campaign Media Release

Prime Minister Kevin Rudd Treasurer Chris Bowen Minister for Small Business Gary Gray
RUDD LABOR GOVERNMENT DELIVERS SMALL BUSINESS TAX RELIEF A re-elected Rudd Labor Government will give Australias small businesses a shot in the arm by delivering tax relief so they can invest, grow and create new jobs. Small businesses are the engine room of our economy, employing millions of people and providing the entrepreneurial drive that will secure Australias future. Federal Labors Small Business Investment Boost will provide an upfront tax deduction for small businesses when they buy equipment and assets worth up to $10,000. Australias almost 3.2 million small businesses will be eligible for this tax relief. This will give small businesses much deserved tax relief, recognising their hard work and their critical role in our economy. It will boost small business cash flows, cut red tape and stimulate investment, creating more jobs as Australia faces the end of the mining investment boom. This policy highlights the choice between Federal Labor and the Coalition at this election. Federal Labor has a positive plan to create jobs beyond the boom. Our plan includes tax relief for small business, cutting red tape and helping small firms take advantage of the National Broadband Network. We recognise that small firms will play a vital role in growing and diversifying our economy. By contrast Tony Abbott has pledged to scrap the existing small business instant asset write-off tax deduction as part of his wide-ranging program of cuts. Federal Labors economic management has kept Australia growing while most other developed economies have stagnated.

Since coming to office we have created nearly one million jobs, invested in infrastructure like transport and the NBN and backed small business by increasing the instant asset write-off. The Small Business Investment Boost will mean small businesses can claim an immediate tax deduction when they buy and start to use eligible assets costing up to $10,000 from 8 September 2013 to 30 June 2015. It will provide upfront cash flow benefits to businesses, rather than making them wait to deduct the asset over a longer period. It will expand and replace the existing instant asset write-off during this period. This initiative builds on Federal Labors record of increasing the instant asset writeoff from applying only to assets under $1,000 when we came to Government to the current level of $6,500. The instant asset write off will remain at $6,500 from 1 July 2015. Under the Small Business Investment Boost, businesses with an annual turnover of less than $2 million will be able to immediately claim a tax deduction for assets they purchase that cost less than $10,000. This could include computers and information technology equipment, photocopiers, workshop and building tools and commercial fridges. This boost will improve cash flow and cut red tape. A caf owner who buys a commercial fridge at a cost of $7,450, for example, will be able to claim the full cost of the fridge as a tax deduction in the first year. This means the business owner would get a $2,235 tax benefit in the first year, rather than only $335 under the old rules thats $1,900 more cash to get on with running their business. The Small Business Investment Boost will benefits all small businesses irrespective of whether they are companies, sole traders, partnerships or trusts. This measure will cost $200 million over the forward estimates taking the Federal Labor Governments assistance for small business to $5.4 billion. The cost of this measure will be offset from uncommitted funds in the budget. BRISBANE 1 SEPTEMBER 2013

BOOSTING INVESTMENT BY SMALL BUSINESSES

Summary
The Small Business Boost expands the incentive for small businesses to invest in their business and create jobs. This will help small businesses across all sectors of the economy to be competitive and thrive, and make the most of new opportunities in Asia. Under the Small Business Boost, businesses will be able to immediately deduct against their tax the cost of assets they purchase that are valued at less than $10,000, such as IT equipment like computers and servers, photocopiers, fridges and workshop tools. The instant asset write-off provides immediate up-front cash flow benefit to businesses, rather than making them wait to deduct the asset over a longer period. This makes it more attractive to businesses to make the investments they need to grow their business. Who benefits from this measure? These changes will be available to around 3.2 million small businesses with an annual turnover of less than $2 million. This benefits small businesses irrespective of whether they operate as a company, sole trader, as a partnership or through a trust. When does the Boost apply? Eligible assets purchased between 8 September 2013 and 30 June 2015 will qualify for the immediate deduction. The Boost is temporary, providing small businesses with an incentive to invest in the near term to remain competitive and helping them adjust to the challenges arising from the end of the China resources boom. Beyond this the existing level of assistance continues.

How is this different from existing support? Since 1 July 2012, small businesses with an annual turnover of less than $2 million have been able to immediately write-off business assets costing less than $6,500. (Prior to 2012-13 small businesses could only write-off assets costing less than $1,000) This announcement temporarily increases this amount that can be immediately deducted up to $10,000. After 1 July 2015, small businesses will be able to write-off business assets costing less than $6,500.

Assets qualifying for an instant asset write off under various policies Value of asset purchased $1,000 to <$6,500 $6,500 to <$10,000 Under Coalition Under Labor Ongoing arrangement Under Labor Small Business Boost

Worked examples Small business investment boost example of benefits compared to current arrangements: Caf owner A caf owner buys a commercial fridge at a cost of $7,450. Under the Small Business Boost, the caf owner will be able to claim the full $7,450 cost of the fridge as a tax deduction in the first year. The caf owner will get a $2,235 tax benefit in the first year from this deduction. Under current arrangements, the caf owner would only be able to deduct $1,118 in the first year (that is, 15%), getting $335 back. So under the Small Business Boost, the caf owner gets $1,900 more cash in their pocket in the first year. Thats $1,900 more cash to get on with running their business. Ongoing $6,500 instant asset write-off example of benefits compared to under the Coalition: Bookshop A bookshop buys a computer for $1,600. Under the instant asset write-off, the bookshop owner will be able to claim the full $1,600 cost of the computer as a tax deduction in the first year. The bookshop owner will get a $480 tax benefit in the first year from this deduction. Under the Coalitions cuts to small business, the bookshop owner would only be able to deduct $240 in the first year (that is, 15%), getting only $72 back. So under the ongoing instant asset write-off, the bookshop owner gets $408 more cash in their pocket in the first year.

Builder A builder buys a scissor lift for $6,400. Under the instant asset write-off, the builder will be able to claim the full $6,400 cost as a tax deduction in the first year. The builder will get a $1,920 tax benefit in the first year from this deduction. Under the Coalitions cuts to small business, the builder owner would only be able to deduct $960 in the first year (that is, 15%), getting only $288 back. So under the ongoing instant asset write-off, the builder gets $1,632 more cash in their pocket in the first year. These examples assume a 30 per cent tax rate the tax rate for companies. Many small businesses operate a sole trader, or through a partnership or trust so the tax benefit may be higher for them. For more information about the benefits of the $6,500 instant asset write-off and other simplification reforms implemented by the Labor Government, see: www.taxwriteoff.gov.au

How does this build on other assistance for small business? During the GFC, Labor supported small business to keep their doors open and their employees in work and many businesses continued to grow in this period. The Rudd Labor Government is delivering around $5.4 billion in tax reform to assist small business including: Increasing the small business instant asset write-off threshold from $1,000 to $6,500 allowing small businesses to immediately write-off eligible business assets costing less than $6,500 which is now being expanded. Other eligible assets costing $6,500 or more can be depreciated in a single pool saving time, money and paperwork. Enabling small businesses to claim up to $5,000 as an immediate deduction for motor vehicles (new or used) costing $6,500 or more. Introducing loss carry-back arrangements that allows companies to carry back a tax loss to get a refund against tax paid in the two previous income years.

In addition, small businesses have benefited from: Tripling the tax free threshold providing a benefit to around 1.4 million small business owners who are sole traders or hold an interest in a partnership or operate through a trust. The new research and development tax incentive that doubles the rate of assistance available to small and medium sized businesses and improves cash flow by providing a 45 per cent refundable tax offset. Investing in skills and trades training after years of neglect by the former Coalition Government which left small businesses across the country struggling to find workers to fill jobs.

The Rudd Labor Government is also cutting red tape for small and medium businesses by: Cutting GST red tape by allowing 1.35 million small and medium businesses with a GST turnover under $20 million to lodge GST returns once a year rather than four times a year (they will be able to make GST instalments during the year with minimal paperwork). Expanding access to the free Small Business Superannuation Clearing House to businesses with less than 100 employees from 1 July 2014. Streamlining administrative arrangements for more than 700,000 small businesses by removing the requirement for businesses with fewer than 20 employees to administer Government-funded PPL payments for their long-term employees.

How is this funded? The Small Business Boost costs $200 million over the forward estimates. The cost of this measure will be met by returning $111.0 million in funding to the Education Investment Fund from the budget (this will ensure the total funding in the EIF remains available for future rounds); reducing the Economic Competitiveness Fund by $68.9 million; and reducing the Building Stronger Communities Fund by $20.1 million.