Labor to support first phase of income tax cuts, but says Budget 2018 misses the mark for SMEs
Wednesday, May 9, 2018/
The federal Labor opposition plans to support the first phase of the government’s planned income tax cuts, but the party claims the 2018-19 federal budget fails to lay a foundation for the growth of SMEs and the overall economy.
Shadow Assistant Treasurer Andrew Leigh tells SmartCompany this morning the vision outlined by Scott Morrison last night misses several key areas that could have a long-term impact on the growth of small businesses.
“Things like better engagement with Asia and better broadband — there’s no attempt to make the national broadband network work properly,” Leigh says.
“I don’t think this is a budget which lays the foundation for a strong and prosperous Australian economy.”
Speaking to the ABC’s PM program last night, shadow treasurer Chris Bowen said the budget highlighted a government “which has completely not learned the lessons of the last five years” because a number of its policies, including decreased funding for education, remained intact.
Bowen was also critical of the government’s continued push for company tax cuts for large firms. However, Labor does say it will continue support the first part of the government’s income tax cuts, which are slated to come in at July 1 of this year.
“We support the first tranche, but the second tranche is off in the never-never,” Leigh says.
“The first tranche seems moderately well targeted at middle Australia.”
The first step of the income tax cut plan sees middle and low income earners receive a tax cut of up to $530 a year, in the form of a non-refundable tax offset they will receive after filing their tax returns.
Labor says it supports this first step, but it takes issue with future changes to the low income tax offset and plans to address bracket creep from 2022 by extending the 32.5% tax bracket to apply to those earning up to $120,000 a year, rather than $90,000.
Should the $20,000 instant asset write-off be permanent?
Leigh says Labor also supports the $20,000 instant asset write-off policy, which was extended for one more year in the budget papers and will now run until July 1, 2019.
He would not be drawn on whether a Labor budget would make this idea permanent, but points out Labor did have a permanent instant asset write-off plan when it was last in government, which allowed companies able to write down purchases of up to $6,500.
“It was permanent under Labor, and again, it [the policy] shows the value of accelerating depreciation schedule,” Leigh says.
Labor has also been championing its own write-off scheme, the Australian Investment Guarantee, which Leigh says would be a efficient way of boosting economic growth. Under this policy, companies of all sizes would be able to claim a 20% deduction on Australian assets they purchase to do business, up to $20,000.
Opposition will review R&D tax changes
Leigh says the opposition will take time to review the government’s proposed changes to the R&D tax incentive.
“We’ll consult with business over this, given there was a review brought down by Bill Ferris,” Leigh tells SmartCompany.
However, he observes the review didn’t recommend “taking money out” of the system, so Labor will be reviewing how the changes — which cap the cash refund at $4 million if a business is turning over $20 million or less, and change the offsets available to larger firms — affect businesses in the long-term.
Having seen the government’s approach to small businesses in this budget, what can SMEs expect from a possible future Labor government as an alternative?
“Labor would invest in better broadband, better schools, university places. We would create an Australian Investment Guarantee and we’d make sure that we close multinational tax loopholes,” Leigh says.