Election 2022: Here’s what small businesses should know about tax policies
Ahead of the federal election on May 21, SmartCompany is breaking down the key issues facing Australia’s small business community. Today we’re looking at tax.
Ahead of the federal election on May 21, SmartCompany is breaking down the key issues facing Australia’s small business community. Today we’re looking at tax, and promises the Coalition and Labor have made to the nation’s SMEs so far.
What’s going on?
The Morrison government undertook an unprecedented spending splash in response to the pandemic-induced economic downturn. Amid a stop-start economic recovery, the next government will be acutely aware of the cost of running the country, and the taxes needed to keep it going.
Why is it an issue?
By and large, Australian businesses are cautiously optimistic about 2022. The bulk of COVID-19 restrictions have lifted, and consumer spending remains high. However, inflation fears and looming interest rate hikes threaten to eat into profits, making tax obligations a key concern for the SME community.
What are the parties doing about it?
The Coalition is banking on the popularity of its small business tax cuts, which came into effect well before COVID-19 swept the world.
Its decision to fast-forward the 25% tax rate for companies with a turnover of less than $50 million proved a hit with SMEs; a third of businesses which benefited from the tax cut have deployed extra cash on capital investments, according to MYOB and The Sydney Morning Herald. SMEs are expected to save $5 billion over two years with the help of those cuts, Treasurer Josh Frydenberg said.
More recently, the 2022-23 federal budget included bonus tax breaks for spending on technology and digital training, a move Frydenberg said will grant a $120 deduction for every $100 spent on relevant upgrades and staff upskilling.
The federal government has also committed to pay-as-you-go tweaks, including a cut to the uplift rate, with those changes predicted to boost cashflow to the tune of $1.85 billion. However, instant asset write-offs and loss carrybacks, two other hits of the pandemic era, are still scheduled to expire in mid-2023.
At this stage of campaigning, Labor’s policy platform says comparatively little about taxation. The opposition’s economic campaign centres on adequately taxing multinationals and cutting down on big-time tax avoidance, a move Shadow Treasurer Jim Chalmers claims will benefit smaller players. The party is yet to confirm the specifics of that plan.
What is known, however, are the policies Labor has dropped since the last election. The opposition has formally dumped an earlier promise to enact a minimum 30% tax rate on payments made by discretionary trusts, a move which experts say could have dramatically impacted the structure of family-run businesses.
The party has also pledged to cut down on red tape come tax time. It will seek “genuine collaboration” with the sector to ease the process, a policy document states.
Labor wants to be “pro-business, pro-employer”, the Shadow Treasurer said.
For its part, The Australian Greens have championed new policies targeting mega-companies and Australian billionaires, overshadowing their 2019-era pledge to reverse the Coalition’s tax cuts and reinstate a 30% rate for businesses with revenues above $10 million.
