The Australian Labor Party has said that it will repeal some of the business tax cuts legislated by the Turnbull government which could affect 20,000 SMEs.
Labor Party leader Bill Shorten confirmed this week that if the party is elected in the next national election, it will reverse the tax cuts introduced by the federal government for businesses with annual turnovers between $10 million and $50 million.
Mr Shorten confirmed the party’s support of tax cuts for businesses generating less than $2 million in revenues per annum, but he remained undecided on whether the party would maintain the tax cuts for businesses with turnovers between $2 million and $10 million.
However, revoking the current arrangement for businesses generating between $2 million and $10 million in revenues is expected to affect at least 20,000 businesses that employ around 1.5 million Australians, reinstating approximately $20 billion in taxes.
The Turnbull government has already legislated a tax rate of $0.275 per dollar for businesses turning over up to $25 million annually, which will be extended to businesses generating up to $50 million in revenues per year on 1 July 2018. It has pledged to further drop the lowered tax rate to $0.25 per dollar by the 2026–27 financial year for all businesses.
However, the government is yet to obtain the necessary eight out of 10 crossbenchers to support its tax plan for larger businesses, having convinced only four crossbench senators.
Mr Shorten said that the reversal of the government’s existing tax plan will enable greater investment in education, the NBN, healthcare and energy, which he indicated are higher priorities.
He also commented that the party will support businesses by ensuring they have access to more “highly skilled apprentices” through the establishment of its Apprenticeships Connect search portal and a dedicated Apprentice Advocate.
The Australian Chamber of Commerce and Industry has said that the federal opposition has dealt Australian SMEs “a kick in the guts”.
ACCI CEO James Pearson urgently called on the opposition to rethink its plan, just a year out from the next federal election.
“This is a kick in the guts for over 10,000 businesses employing over one million workers who now see themselves being penalised for having a go,” Mr Pearson said.
“This announcement pulls the rug out from underneath many hard-working small and medium and family businesses.
“That’s not just businesses directly impacted by today’s decision, but the tens of thousands of smaller businesses with annual turnover of between $2 million and $10 million for whom Labor is still considering whether to put up taxes.”
The biggest issue, according to Mr Pearson, is that businesses due to see lower tax rates come into force on 1 July can no longer be sure that these rates will be maintained.
“That creates uncertainty, which will impact the willingness of business to invest more and take on more employees,” the ACCI CEO said.
“Labor’s policymakers need to understand: this is turnover, not profit. This is your local pharmacist, your local supermarket, your local builder.
“These businesses are not big and they’re not necessarily that profitable, especially right now with energy and other costs hitting hard, and competition from overseas, particularly in the retail sector, intensifying.”
Business Council of Australia chief executive Jennifer Westacott also attacked the announcement.
“The simple reality is, this is another blow to business, another blow to Australia’s competitiveness, another blow to the workers of Australia who require businesses to be successful so that they can be successful, employ more people, hire more people, pay them more,” Ms Westacott told a press conference in Canberra.
“If you’re a business that’s earning up to $50 million, then how do you plan your business when someone says they’re going to reverse tax cuts that have already been legislated by the Parliament? How does business do its planning? How do large businesses, mid-sized businesses do their planning? So, it’s a real blow to confidence, it’s a real blow to competitiveness.”
The Labor government this week announced that it would be also supporting small businesses (as well as consumers) by setting up penalties on NBN Co, the company responsible for the roll-out of the anticipated and highly criticised national broadband network, for underperformance, allowing compensation for customers.
Labor also pledged to reverse the $144 billion personal income tax plan that passed the Senate last week, on the grounds that it would largely benefit high-income earners.
[Related: SMEs key focus of NSW budget]
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