About 870,000 small businesses will have their tax rate reduced from July 1, as the Turnbull government looks to lock in the small business vote before the federal election.
As Treasurer Scott Morrison had promised in the lead-up to the budget, small businesses were a focus, with more tax cuts and more generous tax breaks thrown their way.
From July 1, 870,000 businesses, employing 3.4 million Australians, will get a 1 percentage point tax cut. The small business tax rate will be lowered to 27.5 per cent and the turnover threshold for small businesses able to access it will be increased from $2 million to $10 million.
Another 60,000 sole traders employing about 1.5 million Australians - again with a turnover between $2 million and $10 million - will get a 2.5 percentage point cut in the tax rate.
The government will also increase the unincorporated small business tax discount to 8 per cent and extend the threshold from a turnover of $2 million to less than $5 million. The tax discount will be increased to 16 per cent in stages until 2026-27.
And from July 1, access to instant write-off for purchases of equipment valued at $20,000 each - due to end on June 30, 2017 - will be offered to businesses with a turnover of less than $10 million. Introduced in last year's federal budget, it was limited to businesses with turnover of $2 million.
As long as it is not business inventory, the claim can be made for purchases of items such as vans, utes, coffee machines, office furniture, tools, welding equipment, hot-water units and sound systems.
Assistant Treasurer Kelly O'Dwyer said 170,000 small businesses had made claims worth almost $800 million since the tax breaks were introduced.
The Australian Taxation Office will work with small businesses to move to new Business Activity Statements (BAS) from July next year.
While there was no scope to cut company tax for big business, it will happen over time. The turnover threshold for access to the lower company tax rate of 27.5 per cent will increase incrementally, from $10 million to $25 million in 2017-18, to $50 million in 2018-19 and $100 million in 2019-20.
"By 2020, more than half of all employees of companies in Australia will be in companies paying a lower tax rate of 27.5 per cent," Treasurer Scott Morrison said. "That's around 4.9 million employees whose jobs will be supported by a lower tax rate in just four years."
All up these tax measures will cost $5.3 billion over the next four years. The government hopes to collect a large portion of this from multinationals. It has given the ATO an extra 390 "average" staff as part of its new taskforce aimed at stopping multinational profit-shifting.
The taskforce is expected to raise $3.7 billion in tax liabilities between now and July 2020.