There’s been plenty of movement in the federal parliament since politicians came back to school in February, but when it comes to company tax cuts, Malcolm Turnbull’s government has been insistent: it is determined to give all Australian companies a tax break.
The 10-year plan to lower Australia’s corporate tax rate to 25% has been hard fought, but the parliament passed the laws to lower the rates for many smaller operators a year ago.
In April 2017, the government did a deal with then Senator Nick Xenophon to pass through the first tranche of the changes, which immediately lowered the corporate tax rate to 27.5% for companies with annual turnover of $10 million or less, and put a plan in place to lower rates for companies with revenue of between $10 to $50 million over the coming years.
With the smaller end of town covered off, the next task was to persuade the upper house to ratify the plan for companies with turnover of $50 million or more. This week, reports indicate the government is getting close to securing the necessary crossbench votes to get the plan over the line.
Here’s the state of play.
Nine votes needed
Both the Labor Party and the Greens oppose this part of the government’s tax plan, so the Coalition needs to win the support of nine of the 11 non-Greens crossbench senators.
At present, Conservative party senator Cory Bernardi, Liberal Democrat Senator David Leyonhjelm and independents Fraser Anning and Steve Martin support the legislation.
One Nation Senator Pauline Hanson has been in negotiations with the Coalition about the plan, and Fairfax reports this morning she is likely to come on board and deliver the three One Nation senate votes in support of the policy, having secured a $60 million program for 1000 subsidised apprenticeships, to be focused on regional areas.
The other two players left to be persuaded are Senator Derryn Hinch and Senator Tim Storer — a now-independent senator who was only recently sworn into the role after Skye Kakoschke-Moore resigned from her seat in November because a dual citizenship conflict.
Conversations with these two senators continue: Hinch had requested the big banks be exempt from the tax cuts, but this idea has been rejected. He has sought assurances that workers would benefit from a tax cut, but has been cynical of assurances by the Business Council of Australia that the cuts will be reinvested into Australian jobs, reports Fairfax.
On Thursday, a spokesperson for Senator Tim Storer told The New Daily he was still meeting with a range of stakeholders to determine his approach to the bill.
What the bill would actually achieve
If the government’s proposed bill is passed in the coming weeks, here’s what it will mean for the big end of town:
- In the 2019-2020 financial year, all companies with a turnover of up to $100 million will be entitled to a corporate tax rate of 27.5%;
- In the 2020-2021 financial year, the 27.5% rate will extend to all companies with annual turnover of up to $200 million;
- In the 2021-2022 financial year, all companies with up to $500 million in turnover will be taxed at $27.5%; and
- By the 2022-23 financial year, all companies up to $1 billion in turnover will pay a tax rate of 27.5%.
In the 2023-24 financial year, the plan is for all revenue tests to be removed, so all companies regardless of their size will pay a corporate tax rate of 27.5%.
This will pave the way for a further reduction for all businesses, leading them to pay less each year until all companies pay a flat 25% corporate tax rate from the 2026-27 financial year onwards.