Australia Amends Company Tax Cuts Package
Australian lawmakers have passed legislation to cut the company tax rate for SMEs. However, the Enterprise Tax Plan was only partially approved.
On March 31, the Senate passed legislation to phase in three years of changes to the company tax system. The Government’s original proposals had covered a period of 10 years.
The legislation will raise the maximum turnover threshold for the small business company tax rate from AUD2m (USD1.5m) to AUD10m from the 2016-17 financial year. The company tax rate for these businesses is retrospectively reduced from 28.5 percent to 27.5 percent from July 1, 2016, and the unincorporated tax discount is increased to eight percent.
The turnover threshold will increase to AUD25m in 2017-18 and to AUD50m in 2018-19.
The Government’s Enterprise Tax Plan, first announced at the 2016 Budget, had also included further increases to the threshold each year until 2023-24, and a reduction in the 27.5 percent rate to 25 percent for all businesses by 2026-27.
Prime Minister Malcolm Turnbull said: “We have delivered a tax cut for over three million small and medium Australian businesses, employing 6.5 million Australians – that’s more than half the entire Australian workforce. This reform means that we have now delivered the entirety of the tax cuts we promised to deliver in this term of Government. We have delivered these tax cuts, the first stage of our ten-year Enterprise Tax Plan and businesses with turnovers in this year of AUD10m, AUD25m, AUD50m will benefit.”
During a press conference, Turnbull and Treasurer Scott Morrison were asked whether all businesses will in future be able to benefit from a 25 percent company tax rate. Turnbull confirmed that “Yes, they will.”
Morrison said: “[In] 2026-27 they [all businesses] get to 25. They first drop down to 27.5 percent, down to 27 in 2024-25. So that is when they drop to the next level and 2026-27 they are 25.”
Jennifer Westacott, Chief Executive of the Business Council of Australia, welcomed what she described as an “historic step towards rebooting Australia’s international competitiveness and prosperity.”
However, Westacott urged that “it is now imperative that parliament continue negotiating the full passage of the Enterprise Tax Plan, which should remain in the budget as the only policy on the table to revive the economy with better jobs and higher incomes. There is no Plan B to get the economy moving.”
James Pearson, CEO of the Australian Chamber of Commerce and Industry, said that the Opposition and crossbench Senators had “missed the opportunity to help Australia’s private sector to fire on all cylinders.” He pointed out that Australia’s company tax rate for larger businesses is comparatively high, and warned that this puts the country “at a disadvantage in seeking international investment and encouraging Australians to invest at home.”