House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello MP)

General outline and financial impact

Small business framework

This Bill introduces a standard eligibility criterion that applies across the small business tax concessions. Entities that satisfy an aggregated turnover test of $2 million per annum are able to utilise those concessions that meet their business needs (if they also satisfy any additional conditions, not related to the business size, that currently apply to those concessions).

This Bill also implements several 2006-07 Budget announcements:

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the increase in the capital gains tax maximum net assets threshold from $5 million to $6 million;

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the extension of the roll-over relief available under the uniform capital allowance system to small business entities;

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an increase in the simplified tax system (STS) turnover threshold from $1 million to $2 million;

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the removal of the $3 million depreciating assets test from the STS eligibility requirements; and

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an increase in the goods and services tax cash accounting turnover threshold from $1 million to $2 million.

Date of effect : This measure will generally take effect for the 2007-08 and later income years, and from 1 April 2007 for the fringe benefits tax amendments.

Proposal announced : This measure was announced jointly by the Treasurer and the Minister for Small Business and Tourism in Press Release No. 123 of 13 November 2006.

Financial impact : This measure has these revenue implications:

Compliance cost impact : This measure will reduce compliance costs for many small business entities because they will only have to meet the standard eligibility threshold to gain access to multiple concessions.