Canberra, March 30: Small business owners and self funded retirees in Australia can now rejoice. The federal government has slashed the PAYG (pay as you go) tax for them by 6 percent.">
The scheme was launched in a joint conference addressed by Craig Emerson and Wayne Swan on March 28.
The 720 million dollar tax relief plan would be effective from July 1 this year and will improve the taxpayers’ cash flow in the hard hitting times of recession.
“Small businesses across the country are the backbone of our economy. That's why the Rudd Government is determined to do everything we can to help small businesses in the face of the global recession which is hitting the Australian economy,” said Wayne Swan, the treasurer.
This action by the government will reduce uncertainty for taxpayers and relieve them of the burden of doing their own calculations. Installments will be calculated on the expected Consumer Price Index increase for 2009/10 rather than the previous year's GDP growth.
So, instead of receiving a tax refund at the end of the financial year, small businesses will save money during the year. In NSW, about 350,000 businesses with yearly turnovers of less than $2 million will profit from this scheme.
The plan comes as no surprise after what Swan had said in October last year. He said, “We need a tax system that is internationally competitive and the arguments for reducing company tax rates are something the review panel will need to consider.”
Small Business minister, Craig Emerson, said, “The reduction will provide cash-flow benefits to around 1.5 million taxpayers.”
“Also the reduction in after-tax returns for local investors would create an incentive for local firms to either reduce dividends or abolish dividends altogether,” said Dr Ronan Powell, a senior lecturer at the Australian school of Business.
The cut in PAYG would allow the overpaid tax collections of about $720 million to fuel the economy and help protect Australian jobs. The move has come after the British and U.S. economy contracted in the December quarter.
Swan concluded by saying, “"The Government has been so decisive in putting in place these measures because of the very sharp contraction and demand that is being imposed on this country by the global recession.”
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