Australia’s company tax rate is unlikely to change in the upcoming federal budget, says Treasurer Jim Chalmers, suggesting a combination of targeted tax breaks and incentives will anchor the economic blueprint.
Small businesses face a tax rate of 25%, with larger companies paying 30% on their taxable income.
Business leaders should not bet on wholesale changes to those tax rates in May, Chalmers told ABC’s Insiders program on Sunday.
“That’s not something people can expect to see when we unveil the full package,” Chalmers said.
“But we’ve said publicly before, and certainly behind the scenes, we’re contemplating whether or not there are ways to use the tax system to incentivise the kind of private investment that we need to see in the future of our economy.”
Chalmers was referring to the Future Made in Australia platform, a suite of direct government support measures designed to prop up Australian manufacturing and its competitiveness in the global economy.
Last week, Prime Minister Anthony Albanese said it would encompass “a whole package of new and existing initiatives to boost investment, create jobs and seize the opportunities of a future made in Australia”.
Without sharing too much further detail, Chalmers said targeted tax breaks are under consideration, but are not the only option available to the government.
“That’s obviously one of the tools we are considering, but not the only one,” he said.
“What you’ll see on budget night is a broad and comprehensive strategy of which incentives for industry is a part, but not the only part.
“We really want to incentivise private sector investment as well. We want to turbocharge investment in the future of our economy and that’s a big focus of the budget.”
Beyond plans to stoke private sector investment, Chalmers said the federal government is still targeting a surplus in the 2024-2025 budget, despite declining iron ore prices significantly reducing export values.
“We would like to have a second one, if we can,” he said, but. “We are not there yet”.
As a surplus is no sure thing, Chalmers was quick to frame the upcoming budget in the context of lingering inflation, and the need for fiscal restraint.
What is important is “how we engage in the fight against inflation and make our budget stronger in the context of the global economic uncertainty and fund our priorities,” he said.
Major policy announcements, like the recent changes to merger reform laws, are another important pillar of the government’s economic reform agenda, Chalmers continued.
While the federal government considers those targeted measures, it has also reformed the Stage 3 personal income tax changes, redistributing some of the cuts to lower-income earners.
Chalmers will hand down the 2024-2025 federal budget on the evening of Tuesday, May 14.
Senior Business Journalist
Focused on the small business sector, David’s work covers the political, regulatory, and economic issues facing Australian entrepreneurs. Prior to joining SmartCompany, he was a reporter for Business Insider Australia. You can follow him on LinkedIn.
