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The federal government’s promised 1.5% company tax cut in this year’s budget is likely to be limited to small business only and will extend to the first $5 million in profit, according to reports in The Australian today.
The newspaper cites government “insiders” who say big business will be required to pay the top company tax rate while small business will pay 28.5% on the first $5 million of profit.
Some in the government have argued for a $2 million cut off but it is likely the government will eventually land on $5 million.
SmartCompany contacted Small Business Minister Bruce Billson for comment but did not receive a response prior to publication.
Read More: A field guide to the 2015-16 federal budget
Peter Strong, chief executive of the Council of Small Business of Australia, says he has no problem with big business being excluded from the tax break.
“[$5 million] is a lot of profit so that picks up a lot of medium businesses as well,” he says.
“There are a lot of rumours going around and Bruce Billson keeps things very close to his chest,” he says.
The Australian reports the tax cut will only apply to incorporated businesses, which is in contrast to the government’s stated aim to extend the tax cut to all small businesses.
“Only about one third of Australian small businesses are structured as companies,” Billson told SmartCompany last month.
“The balance aren’t incorporated, yet we absolutely value and want to respect their enterprises as well … I’m doing all I can do to extend the benefits to the small business community in a way that is affordable and sustainable.”
Strong says he still believes the government is working on making sure the tax cut is going to apply to all small businesses.
“How they are going to do it, I’m not sure,” he says.
According to Strong, one definition of a small business the government is looking at is that if you lodge a business activity statement (BAS), you are a small business.
The Australian also reports next month’s budget will include an accelerated depreciation allowance for small business of up to $10,000.
Strong welcomed this report.
“A 1.5% cut will make a difference if you do make a profit of $5 million but for most small business it doesn’t make much difference,” he says.
“Tax depreciation or an investment allowance would be much more helpful.”
Read More: Why small business needs an investment allowance
For those critics of a small business tax cut who say it is creating a “two tier” tax system, Strong says the tax system is already biased against small business.
“We already have a two tier tax system, big business on average pay 19% tax by moving money to Singapore and things like that,” he says.
Cara Waters is the editor of SmartCompany. Cara was previously a senior reporter at the Financial Times website FT Adviser in London and has also worked for The Sunday Times.
