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Australian Party Leaders Trade Blows On Tax

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

17 May 2016


In their first pre-election debate, the leaders of Australia's main parties set out their positions on corporate taxation, trading blows on the Government's recent proposals for company tax cuts.

In his opening statements to the leaders' debate in Sydney, Malcolm Turnbull, Prime Minister of the current Coalition Government, said that his plan was "based upon making our tax system support business," and stressed that "as we bring their tax down, they'll invest more and they'll employ more."

As part of Treasurer Scott Morrison's "ten-year enterprise plan," the small business company tax rate will be cut from 28.5 percent to 27.5 percent from July 1, 2016. The turnover threshold for access to the rate will be increased from AUD2m (USD1.5m) to AUD10m. The unincorporated tax discount will be increased from five percent to eight percent from July 1, 2016. The discount will then be progressively increased to reach a rate of 16 percent on July 1, 2026.

The turnover threshold for access to the lower company tax rate will be increased from AUD10m to AUD25m in 2017-18, to AUD50m in 2018-19, and AUD100m in 2019-20. The company tax rate for all businesses will be gradually reduced to reach 25 percent in 2026-27.

Turnbull added that while the Government believes in lower business taxes, "paying tax is not optional." He explained that it is introducing a diverted profits tax (DPT), whereby if the Commissioner of Taxation "believes that a multinational is shifting profits offshore and doing so for no reason other than … to avoid Australian tax then they will be deemed to have earnt them here [and] they will pay an extra amount of company tax, an extra 10 percent."

Bill Shorten, leader of the opposition Labor Party, countered that "there's a basic debate going on, in this election – do you give AUD50bn worth of tax cuts, over 10 years, to companies up to a billion dollars or do you fund our schools and hospitals?"

According to Shorten, "now is not the time to provide AUD50bn in tax cuts to large companies. I just don't think a small business is one with a billion dollars' turnover."

Shorten added that it "is a joke that someone who earns a million dollars a year, courtesy of this Government, will pay AUD17,000 less tax next year, but you who earn less than AUD80,000, there is nothing for you." The Government has announced that from July 1, 2016, the upper limit for the middle-income tax bracket will increase from AUD80,000 to AUD87,000.

The federal double dissolution election will take place on July 2.

TAGS: court | tax | small business | business | tax avoidance | tax incentives | corporation tax | Australia | tax thresholds | offshore | tax rates | tax reform | individual income tax | Tax | Tax Evasion | BEPS

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