Federal budget brings boost for SMEs

A cut to the company tax rate is a big boost for Australian SMEs to come out of the official budget announcement this week (May 13).

The federal government said around 800,000 businesses stand to benefit from cutting the company tax rate to 28.5 per cent from 30 per cent.

The adjustment, which will come into force from July 1 2015, is hoped to boost profitability and end up lifting the overall national economy.

While the changes will not benefit big business, those companies will be in the firing line with the government imposing an additional 1.5 per cent levy to help fund its paid parental leave scheme.

Treasurer Joe Hockey said the cut to the company tax rate will provide much needed support to small businesses.

"At the end of the day it is the corporates that employ people," he told reporters.

Less tax

The government is also facing a $1 billion deficit in company tax in the coming end of financial year with 2012/2013 collections less than expected.

Fairfax Media reports that the government is still expecting tax receipts to grow though. The government is backing company profits to soar so even with the lower company tax rate, the picture is positive for the next four years.

More investment

With less tax to pay, the door is now open for smaller businesses to improve their cashflow. As a result, recruitment agencies should be able to reinvest in technology.

This tax cut could also encourage business owners to take on additional staff and expand their operations.

Businesses could choose to invest in recruitment software or payroll software. As well as lowering overall running costs, it can increase profitability across the company.

Recruitment software, in particular, is an excellent way for businesses to target the best people for the job and set themselves apart from other companies competing for the same workers.