The new Federal Budget released in 2015 has announced welcoming news of tax deductions for small businesses. The new deductions will reduce the tax revenue for the government in the short term but it will be recovered over the long term. The Federal Government’s new budget has a $5.5 billion small business package at the center of the new budget, aimed at sparking small business growth through tax deductions.

Small Business Tax Deductions

All small businesses that have a turnover that is less than $2 million a year will have the ability to deduct a single asset that has a value of up to $20,000. The deduction will be valid until the end of June 2017. The cost of those deductions to the government’s revenue will be an estimated $1.75 billion over the next four years.

These changes are not the start of progressive tax deductions of this kind for small businesses but simply a change on how quickly the asset can be written off. Before the new changes, small businesses had to deduct a $20,000 asset over the course of 10 years. Now the tax deductions can be made immediately.

The reduced revenues will begin to reverse in the 2018-2019 fiscal period where tax revenue will begin to recover. Since small businesses will have all of their deductions taken out in the beginning, the government will begin to take in more taxes quicker than they would under the old regulations. In the fiscal period 2019-2020 and beyond, the tax revenues will begin to increase and recover the $1.75 billion revenue reduction over the first four years.

The tax deductions have a positive political outcome as well. The Federal Budget shows that the government is on the side of small businesses and wants to give them a chance to prosper. Tax revenue reductions in the short term will turn into tax revenue increases in the future. Since the tax revenues will increase eventually but not immediately, it has the added bonus of giving the impression that the government is on the side of small businesses. With the tax deductions now turning into revenue increases in the future, it shows the government is forward thinking for the country’s financial future. If you are a small business owner now is a great time to take advantage of the new tax deductions of up to $20,000 on individual assets.

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