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ACCOUNTANTS WELCOME SMALL BUSINESS LIFELINE

Helping to fend off a recession could be one of the benefits of the Federal Government's

upfront tax changes for small business - a move welcomed by the National Institute of

Accountants.

NIA president Greg Dennis said that small businesses were always under cash flow pressure

and this was drawn into sharper focus in uncertain economic times.

"This change to the tax formula could have a ripple effect through the economy as it assists

small businesses to pay suppliers faster or even expand their businesses which we would

encourage to help fend off a recession.

"This change is important to small businesses with turnovers less than $2 million as it

effectively frees up their cash. This cash can be used to meet short term payment obligations

to help keep the business solvent," he said.

Prior to this change, small businesses were required to calculate their likely tax liability by

using the previous year's turnover plus 8%. The NIA strongly welcomes this change as it will

greatly assist the cash flow of small businesses making quarterly tax instalments.

Although this move will help small business free up cash in the short term the NIA is calling for

the Government to lower the ongoing rate of tax for small business.

"The NIA in its recent submission to the Henry Review asked the Government to consider a

lower tax rate of around 20 per cent for small business," Mr Dennis said. "We have noted that

the Chinese Government has recently introduced a lower tax rate of 20 per cent for small and

micro enterprises and 15 per cent for hi-tech enterprises."