Australian Parliament Approves Small Business Tax Measures

by Mike Godfrey, Tax-News.com, Washington

18 March 2005

A bi-partisan vote in the Australian parliament has approved tax incentives for small businesses, including a 25% entrepreneurs' tax offset on the income tax liability attributable to business income for small businesses with an annual turnover of $75,000 or less.

The newly-approved law will also give small businesses greater flexibility in the way they determine their taxable income.

With the federal budget coming up in May, Australian business lobbies have been vociferous in demanding reductions in business taxation, and complaining about the high rate of personal taxation.

Business Council of Australia president Hugh Morgan said this week that the "remarkably high rate" of company tax was an area the group wants the government to address. “This needs to be attended to”, commented Mr Morgan, who also pointed to the “ill-fitting” tax system, where the 47% top rate of personal income tax sits significantly higher than the 30% corporate income tax rate.

The country’s high marginal tax rate was also noted in the OECD’s latest assessment of the Australian economy, which observed that the disparity between personal and corporate tax “creates an incentive for a redefinition of personal income as company income”.

Australian Prime Minister John Howard hinted in a radio interview on Tuesday that the government has not ruled out the inclusion of tax cuts in its May Budget, saying that if essential spending has been provided for, and the Budget surplus is strong enough, tax relief will be considered.

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