The business community could know within weeks if the federal government’s plans to cut the company tax rate will come into fruition, with the Senate expected to vote on legislation for the reform after it returns to session in early November.
However, the size of the companies that will receive tax relief is still up for debate, with the Coalition, Labor and key senators all holding different views as to which companies deserve a tax cut.
Here’s where the major players stand.
Treasurer Scott Morrison unveiled the government’s “ten year enterprise tax plan” in the May budget, outlining a plan to phase-in company tax cuts for all businesses by 2026-27.
The first phase in the plan would involve cutting the rate of corporate tax from 30% to 27.5% for small and medium businesses turning over up to $10 million annually.
The second phase would extend the lower company tax rate to companies with $25 million in annual turnover by 2017-18; to companies with up to $50 million in turnover in 2018-19; and to companies with up to $100 million in annual turnover in by 2019-20.
With the government so far unable to secure enough support for the entire plan, it is now aiming to introduce a company tax rate of 27.5% for companies with up to $50 million in annual turnover, and according to Fairfax, has the support of a crossbench senators from the One Nation party, as well as David Leyonhjelm and Bob Day.
Treasurer Scott Morrison is today meeting with medium size employers in South Australia to discuss the government’s plans, in a move that has interpreted as the Coalition taking on Senator Nick Xenophon, who supports a company tax cut for companies turning over up to $10 million a year, but not any higher.
The federal opposition signalled in May it won’t support the slated company tax plan, arguing only small incorporated businesses with less than $2 million in turnover deserve the tax relief.
In 2015, the government cut the corporate tax rate by 1.5% for incorporated businesses under that turnover threshold, and Labor said in May it would support a further cut for those businesses, but no more.
“Small business deserves that and that’s fair enough,” shadow treasurer Chris Bowen said at the time.
While the government can pass legislation for its tax cut plan through the House of Representatives without Labor’s support, it will need support from at least nine out of 11 crossbenchers to get the reform through the Senate.
That support won’t come from the Greens, with the party opposed to any cuts to the company tax rate.
Greens spokesperson for small business, Senator Nick McKim, told SmartCompany in May small businesses will lose their competitive advantage if big corporates also get a tax cut.
“The Greens believe there are more practical ways to help small business,” he said at the time.
“For example, we are proposing much greater government investment in stimulating renewable energy, which would provide massive opportunities for small business.”
Nick Xenophon Team
The three senators from the Nick Xenophon team will play a key role in determining if legislation to cut the company tax rate passes the Senate.
According to Fairfax, the minor party supports a company tax cut but only for companies with annual turnover of up to $10 million.
Xenophon told Fairfax he is expecting a tough negotiation with the government but he wants to see other measures adopted to stimulate business investment, in addition to tax relief.
Among his concerns are high energy costs for businesses in South Australia, the need to attract more migrant workers to the state and improving access to funds already earmarked for firms in the automotive industry.
“I want real jobs and real growth rather than just talk about it,” he said.
“I expect the Treasurer to be a tough negotiator but he can expect us to be tough negotiators.”
What does the small business community want?
Business groups, including the Australian Chamber of Commerce and Industry and the Council of Small Business of Australia (COSBOA) have been vocal in their support of corporate tax relief for small businesses, while groups like the Business Council of Australia have also lobbied for tax cuts for the big end of town.
Peter Strong, chief executive of COSBOA, told SmartCompany this morning his members “certainly support the tax break”, but they also understand concerns some people have about large corporates having their tax bills slashed.
He is therefore calling for a “flexible” approach that would start with legislating for a tax cut for companies turning over up to $10 million a year.
“Do it in small steps,” he says.
“Get the $10 million cut through, show that it encourages investment and job creation, and then do more.”
While Strong says there is an element of frustration among business operators that it has been several months since the policy was announced without action, he says the small business community is “used to it”.
“We’ve had years of it now,” he says.
“People want to see a plan and if they do, the level of frustration is not the same.”
With small and medium businesses making up the majority of businesses in the Australian economy, Strong says it makes sense to give them tax relief first.
“It’s a trickle up effect … it’s about showing respect to the majority,” he says.