Australian Opposition Pledges Company Tax Cut

by Mary Swire, Tax-News.com, Hong Kong

30 July 2010

The coalition opposition, led by the Liberal party’s Tony Abbott, has made an electoral commitment to reduce company tax in Australia from the current 30% to 28.5%, in competition with the Labor government’s existing commitment to reduce it to 29%.

The opposition is promising to make the company tax cut effective from July 1, 2013. It says that it will “make Australia’s tax regime more competitive on the international stage and make Australia a more attractive place to do business, helping to boost investment and jobs”.

It estimates that this measure will cost AUD2.55bn (USD2.3bn) over the two-year forward estimates. Funds will be provided from the nearly AUD24bn in recurrent savings that the coalition says that it has identified over those forward estimates.

It calls the measure a “modest, targeted and economically responsible tax relief”, and professes that it is “a further demonstration of the Coalition’s commitment to deliver lower taxes for Australians”.

However, the government, in a comment on the opposition’s proposal, has called it a "card trick", especially as the opposition has previously proposed to impose a 1.7% levy on taxable profits over AUD5m made by Australia’s larger companies, to fund a policy to increase paid parental leave. A minister called the proposal a simultaneous tax rise and a tax cut for the same companies.

The government had originally intended, when it introduced its proposed extension to the resources super profits tax (RSPT), to reduce company tax further to 28% in 2014-15. That further cut was abandoned when it re-negotiated the RSPT into the now-proposed minerals resource rent tax, reducing future funds available for tax reforms.

The government did, however, retain its earlier cut in the company tax rate to 29% from July 1, 2012, for small businesses. In reply, the opposition has now also felt it necessary to stress its own support for small firms.

The coalition has said that it will reward calculated risk-taking to grow small businesses by working with regulatory authorities to ensure that the commitment of personal guarantees and private asset mortgages is rewarded by more affordable and improved access to small business finance.

The coalition will also extend Unfair Contract protections for small businesses, by extending the protections currently available to consumers to cover the small business sector, and will require government departments and state agencies to use tender procedures and procurement practices that do not disadvantage small business participation.

It will also ensure that departments and state agencies pay small business bills on time by adopting a ‘pay on time or pay interest’ basis. It will apply to any small business that provides a service to the government. If an account is not paid within the 30 days, interest will be applied at the same rate as the ‘general interest charge’ applied by the Australian Taxation Office to late tax payments.

The coalition will also give small businesses a say in taxation. Under a coalition government, the Board of Taxation will always include a representative from the small business sector, while it would ensure genuine consultation with the small business sector about changes in government-imposed fees and charges, to ensure that any change is implemented in a proportionate and equitable way.

In addition to the coalition’s AUD2.55bn commitment to reduce company tax, it will commit an addition AUD13.5m over the forward estimates to fund all of its measures to support small businesses.

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