The Australian, January 28, 2017:
Companies generating 80 per cent of all profits will miss out on a tax cut under a deal being hammered out between the Turnbull government and crossbenchers.
The enterprise tax plan, which was the centrepiece for Malcolm Turnbull’s re-election campaign, is expected to be split, with a bill being put to the Senate for tax cuts only for firms with sales of up to $10 million. “It would start this year. We’re presenting that legislation to the Senate and we’ll be negotiating with the crossbench to secure its passage,” the Prime Minister said yesterday.
Mr Turnbull said the government was continuing to negotiate for the entire company tax package, which would bring the tax rate down from 30 to 25 per cent over a decade. However, he has indicated the government will put to the parliament only legislation that he is confident will win support.
“It’s not my practice to introduce legislation into the parliament that isn’t going to be passed,” he said.
Mr Turnbull is confident of winning support for raising the threshold for a special small business tax rate from what the Australian Taxation Office terms as “microbusinesses” with turnovers of less than $2 million to include companies with sales of $10 million.
“Nick Xenophon, who obviously has a key bloc of votes, has said he will support a reduction in company tax for businesses with a turnover of $10m or less,” Mr Turnbull told Melbourne radio station 3AW yesterday.
“We’re obviously talking to him and the other crossbenchers about the whole package and we’ll obviously talk to the Labor Party.” The Abbott government cut the company tax rate to 28.5 per cent for businesses with turnover below $2m in 2015-16.
Last year’s budget promised to lower the rate further to 27.5 per cent and to lift the threshold in steps, starting with $10m this year, $50m next year and then in increasing steps to reach $1 billion by 2022-23. The tax rate would then be lowered to 25 per cent for all business by 2026-27.
Labor has vowed to oppose any tax cut for businesses with a turnover larger than $2m, saying the cost cannot be afforded while the budget is in deficit and the economic benefits would be small. However, the government believes it can get support of not only Senator Xenophon, but also One Nation and possibly even the Greens for the $10m threshold.
ATO figures show there are 730,000 microbusinesses paying a total of $7.6bn in tax and a further 57,000 small businesses paying $6.7bn in tax that will get a tax cut if the threshold is raised to $10m.
However, this would leave the 17,000 bigger companies, which pay most of company tax, or more than $50bn, still paying one of the highest company tax rates in the world.
Scott Morrison returns from Europe this weekend and plans intensive negotiations with crossbenchers about the tax package.