The Liberal Party will abandon its promise to cut company tax by 1.5%, should it be elected, new reports have suggested, disappointing business groups which have long called for a cut in this tax rate.
Opposition Leader Tony Abbott has consistently said he would fund a $3.3 billion parental leave scheme by raising company tax a further 1.5% on the biggest 3,200 companies while introducing a cut of the same size for other businesses.
In net terms, this would have resulted in companies outside the top 3,200 having a company tax rate of 28.5%, down from the current 29%.
Get daily business news.
The latest stories, funding information, and expert advice. Free to sign up.
But now, sources have told The Australian Financial Review a 1.5% tax decrease was still possible, but unlikely. This would mean the top 3,200 companies are slugged with an extra tax but other businesses would receive no relief.
A spokesperson for Shadow Small Business Minister Bruce Billson told SmartCompany commitments can only be made based on the latest information.
“As of the last budget we believe that we can introduce a modest cut to company tax,” he says.
“Unlike the Government we will not make reckless spending promises without taking into account changing budget forecasts and a deteriorating budget position.”
The move, if it is accurate, is sure to disappoint businesses. The business community reacted negatively last year to the Government’s announcement it would abandon a company tax cut for SMEs.
Abbott yesterday reaffirmed his commitment to the paid parental leave scheme and said it would be funded by increasing the company tax rate for Australia’s largest 3200 companies.
“It’s been a signature policy of ours since early 2010 and I want this important reform to be one of the things for which an incoming Coalition government is remembered,” he said.
“I want to stress that this isn’t just a women’s issue, it’s not just a families issue, it’s an economic issue and if we can get more women productively into the workforce, that’s good for the economy as well good for families as well as good for society.”
Earlier this year SmartCompany investigated the policy changes small business leaders wanted to see this year and a cut in the company tax rate was a regular feature.
SmartCompany contacted the executive director of the Council of Small Businesses of Australia, Peter Strong, but he was unavailable to comment prior to publication.
Executive director of the Australian Retailers Association, Russell Zimmerman, previously told SmartCompany changes to the current tax system are needed.
“If there are good reasons to make changes, changes that make more economic sense, then surely we should make those changes,” he said.
Chief executive of the Australian Industry Group, Innes Willox, was quoted in The Australian Financial Review as saying there were “deep concerns” about Abbott’s parental leave scheme.
He said the proposal would, “put a huge additional cost on bigger companies”.
“At times like these businesses need reductions on cost burdens, not new ones”.
The move comes alongside an admission from the Opposition the budget may not return to surplus for some time, with Opposition Treasurer Joe Hockey signalling a longer than expected wait.
“We are not going to go down the path of austerity simply to bring the budget back to surplus because it would end up being a temporary surplus, depending on how big the deficit is that we inherit,” he said yesterday.
Earlier this year Hockey pledged on ABC Radio’s AM program the budget would be returned to surplus in the first year of governing, “and every year after that”.