Australian Parties Spar Over Tax

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

05 August 2010

Tony Abbott, the Liberal party leader of Australia’s coalition opposition, has announced a revision to the opposition’s company tax proposals, partly as a counter to attacks on it by the government.

In the run-up to the election later this month, the coalition opposition 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%.

However, the government has been able to label that commitment as a "card trick", as the opposition had also proposed to impose a 1.7% levy on taxable profits over AUD5m (USD4.5m) made by Australia’s larger companies, to fund a policy to increase paid parental leave to 26 weeks. A government minister called the proposal a simultaneous tax rise and a tax cut for the same companies.

Abbott has now decided that a company tax increase of only 1.5%, not 1.7%, on larger companies will be sufficient to fund the increase in paid parental leave, but that the increased leave will not come into effect before July 1, 2012 – some 18 months after the government’s 18-week scheme is due to begin.

The opposition’s general 1.5% reduction in company tax will be effective one year later than that, from July 1, 2013 – in line with the government’s 1% company tax cut.

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