The Australian Tax Office says it will not be increasing the GST rate to 20 per cent on some small businesses over the next three years.
The change comes in response to a landmark ruling from the High Court in February, in which the court ruled that the current GST rate of 20 per year was not discriminatory against businesses.
“The majority of Australian businesses have been hit by a significant increase in the GST,” Chief Commissioner Andrew Scipione said in a statement.
“In fact, in the past year, small businesses have suffered an average of 6.4 per cent GST increase, or approximately $13,000 for each small business.”
Businesses can expect to pay a tax rate of 5 per cent to 6 per cent in 2017 and 6 per in 2018, based on the Australian Bureau of Statistics (ABS) measure.
The new rate is part of a broader review of the taxation of small businesses in the wake of the High Tax Court ruling.
In a statement, the government said the review was “about making sure the GST system works for small business Australians”.
“The Government has committed to make changes to the GST structure to ensure small businesses receive a fair share of the revenue generated from the GST, to ensure that businesses receive the value they are providing to the economy and to support the growth of the economy,” the statement said.
However, business groups have welcomed the decision to lower the GST on small businesses.
“The proposed 20 per se increase to the Australian rate is the fairest way to reduce the GST and we commend the Government for their commitment to making this change,” Michael Bowers, chief executive of the Australian Chamber of Commerce, told the ABC.
But the Australian Business Council said the new rate was “not a good enough return” and “will be a drag on the small business sector”.
“We believe a 20 per-cent rate would be too low for small businesses and would leave small business and business owners feeling left behind,” the group said.
“Small business should pay no more than 5 per per cent of their income tax and we have serious concerns about the new GST rate, especially when the new tax will increase the cost of living for many small businesses.”
The government will be consulting on the changes to small business rates in the coming weeks.
Mr Scipio said the Government would review its tax regime over the coming months.
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