More than three million small businesses will benefit from tax cuts after the Federal Government negotiated an 11th hour deal with the Nick Xenophon Team in the senate last week.
Under the new legislation businesses with annual turnovers of up to $10 million will have their tax rate lowered from 28.5 per cent to 27.5 per cent this financial year and companies with a $50 million turnover will pay the same from 2018.
The rate will drop to 25 per cent by 2026-27.
Small Business Minister Michael McCormack lauded the cuts and says by having a lower tax rate they can invest more, grow more and employ more.
“We know lower taxes means small businesses can grow, pursue new ideas and create more jobs,” he says.
“We have changed the definition of small business from an annual turnover of $2 million to $10 million, to make sure more Australians can take advantage of the Government’s support for small business.
“We have dropped the tax rate to 27.5 per cent and expanded the unincorporated tax discount to eight per cent.
“Together, Australia’s small businesses employ around 5.5 million people and provide the goods and services Aussies need.
“I know this vital tax cut is an important injection of confidence for the hardworking Australians in small business who contribute $380 billion to our gross domestic product.”
Chairman of Competitive Foods Australia Pty Ltd Jack Cowin, who operates 400 Hungry Jacks stores across the country and is a major shareholder of Domino’s Pizza, says the tax cuts are a step in the right direction but wonders how much they will achieve.
“People feel good, but the real question is; have companies that have less than $50m of turnover got the financial capacity to really invest money into new projects, new business and things like this that are going to create jobs and activity; which is what the purpose of it is,” he says.
“I know there are a lot of small companies and hopefully that will apply, but would it have been more effective if it had been across the board.”
Cowin, who will be keynote at a CCI Lighthouse Leadership series on 18 May, says Australia has a serious problem of spending too much money versus income.
“So that is probably the trade-off here,” he says.
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