Company tax rate on tenterhooks

Tuesday 14 August, 2018

The “Super Saturday” by-elections sharpened the public’s focus on company tax cuts, with the chattering classes claiming it a vote on the Coalition’s centrepiece policy.

The Senate will vote on the full package next week regardless of the numbers and some Coalition backbenchers are calling on the government to drop the cuts altogether.

Pauline Hanson’s One Nation and the Centre Alliance are critical votes for the government and negotiations are currently taking place to secure the full package of cuts ahead of the vote.

At present businesses with a turnover of $50 million or less pay company tax at a rate of 27.5 per cent, falling to 25 per cent in 2026-27.

The remainder of the package legislates a tax cut for all companies to 25 per cent in 2026-27.

Should a compromise be reached prior to the vote next week, it will likely be one of two outcomes:

  • Extend the current threshold from $50 million to $500 million; or
  • Fast track the tax cut for businesses with turnovers capped at $50 million to 25 per cent.  

PHON and Centre Alliance has expressed support for the latter.

Small business perspective  

Overall, CCIQ supports the Enterprise Tax Plan in its entirety as a job creation measure.

There is no doubt that more competitive tax rates need to be applied to larger companies and multinationals to attract and retain business investment on Australian shores.

Nevertheless, CCIQ urges the government to deliver on a tax cut for small businesses and bring forward the 25 per cent for those businesses with a turnover of $50 million or less.

If the government is sensible, it will be able to deliver a tax cut to about 94 per cent of Queensland businesses, who also provide the largest share of total employment in Queensland.

Political pragmatism is the name of the game, otherwise it risks giving Labor too much oxygen on the claim that this is a ‘tax cut for the big banks’.

Securing an accelerated tax cut for small business will show the Coalition is serious about backing mum and dad businesses by making this an election issue.

The government has now conceded that if it is unable to pass the full tax package next week, it will not take the policy to the next election.

If elected, Labor will retain the current tax cut for small businesses but will stop it from dropping to 25 per cent.

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