Budget 2016: Company tax break extended for small business, ATO multinational crackdown launched
Business has been a centrepiece of Treasurer Scott Morrison's first budget, with small companies receiving a surprise extra tax cut but large multinationals facing a fresh crackdown.
Companies with less than $10m turnover will pay 27.5pc corporate tax rate from July 1
Ambition to lower corporate tax rate for all firms to 25pc by July 2026
Multinational tax crackdown expected to yield $3.9b over next four years
While it was widely expected that there would be some form of company tax relief, much of the speculation centred on a long-term path to corporate tax cuts.
However, the Government has elected to give small and medium-sized businesses a pre-election tax cut, with their company tax rate falling to 27.5 per cent from July 1 this year.
That is a further 1 percentage point reduction for small businesses with annual turnover less than $2 million, which already had a 1.5 percentage point tax cut last year.
It is a 2.5 per cent tax reduction for up to 60,000 firms with annual turnover between $2 million and $10 million.
The Government has also announced the expected glide path to a lower corporate tax rate for all businesses, large and small.
The threshold for the 27.5 per cent tax rate is planned to rise from $10 million to $25 million on July 1, 2017, to $50 million in 2018-19 and $100 million in 2019-20.
25 per cent corporate tax within a decade
In a second phase, beyond the budget estimates, the Government plans to keep raising the maximum turnover threshold for the 27.5 per cent corporate tax rate until all businesses are included by 2023-24.
By 2026-27 the Government, should it still be around to implement its plans, intends to lower the corporate tax rate to 25 per cent for all businesses.
Non-incorporated businesses again do not miss out on tax relief, with those turning over less than $5 million getting an 8 per cent income tax discount.
All small businesses with a turnover of less than $10 million will also now be eligible for the instant tax write-off for equipment purchases of up to $20,000 made next financial year.
Those tax cuts and other measures will cost the Government $5.3 billion in lost revenue over the next four years, and an unspecified extra amount beyond the forward estimates, but Treasury said the company tax cuts should add about 1 percentage point to Australia's economic growth over the long term.
Big business accounts for 'more than half' of jobs growth
The measures were announced by the Treasurer as part of his push for "jobs and growth", mentioned 13 times in his prepared budget remarks.
"Small and medium businesses are driving jobs growth in Australia and must continue to do so," Mr Morrison said.
"A tax on their businesses is a tax on their enterprise and the jobs they provide."
However, economist Saul Eslake, a vice-chancellor's fellow at the University of Tasmania, said the idea that small businesses drive jobs growth is somewhat of a myth.
"Like the measures for small business from last year's budget, the measures in this year's budget are more about playing to the Coalition's long-held belief in the nobility of small business than they are about stimulating employment and innovation," he told ABC News Online.
"ABS figures show that, although businesses with fewer than 20 employees account for more than 40 per cent of the workforce, they have generated only 18 per cent of the increase in employment over the last five years, whereas businesses with more than 200 employees have accounted for more than half the increase in total employment over that period."
Multinational tax crackdown extended
The cost of these tax breaks for business is being partially offset by a crackdown on multinational corporate tax avoidance.
The Australian Taxation Office (ATO) will receive an extra $679 million over the forward estimates to hire an extra 390 staff to form part of a thousand-person team to monitor large firms.
These extra tax officers will also have a tougher anti-profit shifting law to assist them, with the Government announcing a UK-style diverted profits tax, popularly known as the "Google tax", to charge companies a higher 40 per cent tax rate on money they seek to shift offshore to low-tax jurisdictions through intra-company loans.
The Treasurer said the corporate tax crackdown should raise an additional $3.9 billion in revenue over the next four years.
Source: ABC News