Last night’s Federal Budget included a raft of measures to support Australia’s small businesses and sole traders in an effort to stimulate investment and job creation.

Among the small business initiatives introduced in the 2022-23 Federal Budget are reductions to some tax instalment rates, changes to how PAYG tax instalments are calculated, and improvements to reporting systems.

Taken together, the changes are expected to create annual compliance savings of $800 million, which Treasurer Josh Frydenberg says small businesses can use to “invest, innovate and create more jobs”.

“Tonight’s Budget delivers for Australian families, for seniors, for small businesses, with cost‑of‑living relief now in a temporary, targeted and responsible way, with guaranteeing the essential services that Australians rely on,” Mr Frydenberg said on Tuesday. 

PAYG changes lower tax burdens

Part of the government’s new tax plan will see the GDP uplift rate (which is used to calculate PAYG and GST instalments) lowered from 10% to 2%.

This lower uplift rate will translate to lower tax instalments, with government estimates suggesting the changes will create $1.85 billion in cash flow support for 2.3 million small businesses and sole traders.

The Federal Government also outlined changes to the PAYG system itself that will allow businesses to calculate their instalments based on financial performance and potentially have some automatic payments refunded when performance drops.

That program will initially be rolled out across 500,000 businesses.

Other tax payment system improvements flagged include enabling businesses to share single touch payroll data on an ongoing basis to allow payroll tax return forms to be prefilled and digitalising trust income reporting.

Sources

• The Hon Josh Frydenberg MP, Cash flow support and red tape reduction to help small business
• The Hon Josh Frydenberg MP, Doorstop interview, Parliament House, Canberra
• Smart Company, Budget 2022: Major PAYG overhaul in $800 million small business package