Business groups have urged the government to bring forward already legislated tax cuts for small to medium businesses after it failed to pass its final stage of company tax cut legislation through parliament yesterday.
Amid the current leadership roil ensconcing Canberra, the government attempted to pass the third and final stage of its company tax cut plan through the Senate where the legislation has been debated and contested for months.
With Labor opposing the cuts for businesses with over $50 million in turnover, support from the crossbench was needed to pass the legislation. However, the government failed to secure crucial votes from Pauline Hanson’s One Nation party, even after an eleventh-hour amendment to the bill which would see the big four banks excluded from the 5% cuts.
In a press conference yesterday, Prime Minister Malcolm Turnbull admitted defeat on the higher tranche of tax cuts, saying despite the government’s desire to keep Australia’s corporate tax rates competitive, it had to recognise the “iron laws of arithmetic” and face up to the fact they did not have the numbers to pass the legislation.
“The reality is that it cannot pass the Senate and I think the truth is, that the political climate which used to have a broad bipartisan consensus – as you heard from so many Labor leaders and treasurers – that lower company tax creates more investment, higher productivity, more jobs and higher wages, a proposition that has been proved again and again,” Turnbull said yesterday.
“While that consensus used to be there, it is there no longer, and there is a lot more work that needs to be done.”
At the same time, Turnbull reinforced the Coalition’s passing of tax cuts for businesses with turnover of up to $50 million. He said there a 3.3 million of these business, employing the majority of the private sector workforce.
Those tax cuts came into effect early last year, bringing in plans to drop the company tax rate for those businesses gradually over the next 10 years from 30% to 25%.
For businesses turning over less than $10 million, a lower company tax rate of 27.5% came into effect last year, which will drop to 27% by 2024-25, and to 25% by 2026-27. Similarly, companies with less than $50 million in turnover will see a lower rate of 27.5% this current financial year, which will decrease at similar levels to 25% by 2027.
Questions have been raised by business groups. With the government’s landmark big business tax cuts dead in the water, they’re questioning whether small businesses should have to wait until 2027.
In a statement, Australian Chamber of Commerce and Industry (ACCI) chief executive James Pearson said the failure of the government to wrangle big business tax cuts through “must not mean the death of tax reform”.
“If we can’t legislate a tax cut for all businesses, then it’s time to bring forward the already legislated tax cuts for small, medium and family businesses with turnover of up to $50 million. Right around the country, businesses of all shapes and sizes are telling us they are struggling to keep up with the costs of doing business,” Pearson said.
“Politicians have a chance to help business get on with investing, creating wealth and providing jobs. We call upon the major parties to accelerate the legislated tax cuts to give small, medium and family businesses a fighting chance.”
Asked yesterday if he would consider bringing forward the tax cuts, Turnbull neither confirmed nor denied the party would, but said it was “under consideration” and that the government had SMEs in its focus. Finance minister Mathias Cormann also said small to medium businesses were the government’s “priority”
“It’s important, I think, to recognise that reality, focus on the small and medium part of the business sector,” he said.
Speaking to SmartCompany, Council of Small Business Organisations Australia (COSBOA) chairman Peter Strong said he was pleased to see ACCI supporting COSBOA’s policies, and while he believes big business company tax cuts “will have to happen at some stage”, he’s planning to work with the government to ensure clearer communication around tax cuts for SMEs.
“We would like to meet with the treasurer’s office to discuss better communication around tax issues for the small business community,” Strong says.
While ACCI’s proposal didn’t include a concrete time period for the cuts to come into effect, Strong suggests the government could roll it out by July 1 2019.
“That would send a really good message to the small business community if they brought it forward really quickly.”
However, as there’s every chance Australians could be heading to the polls in the next two months given current events in Parliament, there’s no knowing what small business legislation is set in stone.
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