The Australian, April 1, 2017
The Turnbull government has secured a tax cut for more than 800,000 small companies in a Senate deal that also delivers bonus payments for millions of pensioners, cementing a vital part of the Coalition’s agenda but shelving tax relief for big business.
In a grand bargain on tax reform, the government ramped up its work on energy security to win over the Senate crossbench with a $110 million concessional loan for a solar project and a threat to gas exporters to boost domestic supplies to ease pressure on prices.
The government emerged from two days of high-stakes negotiation to win the numbers to legislate the business tax cuts it pledged for this term of parliament, cutting the rate for all companies with up to $50m in annual turnover.
More than two million small employers that operate as sole traders or unincorporated businesses will also win from $450m in more generous tax discounts and $2.2 billion in concessions.
Malcolm Turnbull insisted the government remained committed to the entirety of its sweeping company tax cut at a cost of $48.7bn over 10 years, but the policy is under a cloud after Labor, the Greens and most crossbenchers vetoed cuts for companies over the $50m threshold.
The changes approved by the Senate will give up $24bn in tax revenue over a decade, with the government arguing it was helping employers keep more of their own earnings.
The Coalition also had mixed success with its free-speech reforms yesterday, securing stricter rules for deciding complaints against offensive language but failing to change the wording of racial hatred laws.
Parliament legislated changes to the Australian Human Rights Commission to speed up its work and throw out “unmeritorious” complaints such as those against The Australian’s late cartoonist Bill Leak. But the Coalition was unable to secure crossbench support to replace “offend”, “insult” and “humiliate” with “harass” in section 18C of the Racial Discrimination Act.
After the Senate voted to pass the small business cuts, the Prime Minister declared “the beneficiaries will be Australian workers” because 6.5 million employees would be better off at companies that could expand with the help of lower taxes. “They will be able to invest more, grow more, employ more — that is the fundamental leverage that cutting business tax delivers,” he said.
In the biggest single concession to secure the deal, the government announced a one-off payment for recipients of the Age Pension, the Disability Support Pension and the Parenting Payment at a cost of $260m.
The bonus will be $75 for singles and $125 for couples to meet a request from Senate crossbencher Nick Xenophon to help pensioners meet the rising cost of electricity and gas. The Nick Xenophon Team held out later than others to push for the bonus as well as an investment boost for energy projects and a policy on “affordability and reliability” that will address the nation’s commitments to cut greenhouse gas emissions at last year’s Paris climate change summit.
Finance Minister Mathias Cormann rejected Labor suggestions the new policy would clear the way for an emissions intensity scheme in the electricity sector, amid warnings from ministers and backbenchers that this would lead to a revolt over a scheme that puts a price on carbon.
Senator Cormann, who led the Senate negotiations late into the night on Thursday and all day yesterday, declared the result delivered “the first three years of our 10-year plan” and restated the commitment to the full policy.
Scott Morrison has expressed softer support for the full 10-year policy in recent weeks amid speculation it could be scaled back, but the government now appears set on keeping the policy in the May 9 budget.
Companies with up to $10m in annual turnover will get the cut in the company tax rate from 30c to 27.5c in the dollar this financial year but others will have to wait. Companies with up to $25m in annual turnover will get the tax cut next year while those up to $50m will get it in 2018-19.
While the government could have accelerated the cut in the tax rate for all of the 800,000 employers, every company with up to $50m turnover will have to wait until 2024 for the rate to fall to 27 per cent. The rate will fall to 26 per cent the next year and will reach 25 per cent in 2026-27.
Bill Shorten backed the tax cut for companies up to a $2m threshold, but he is now vulnerable to government claims that he is denying help to more than 60,000 companies that are bigger than the Labor limit and have turnover of up to $50m.
Mr Shorten dismissed yesterday’s outcome as a “micro-sized version” of the government’s big business tax cuts.
Desperate to reach the $50m threshold after Senator Xenophon had insisted on $10m for months, the government agreed to the long list of commitments on energy that included several reviews but also concrete investments.
The top undertaking is to “explore and pursue” an energy reliability policy from the Australian Energy Market Commission and the Climate Change Authority, guided by the existing work of Chief Scientist Alan Finkel and to be delivered by June.
While this will include references to emission reduction targets, it is billed as part of an “affordability and reliability” policy and is meant to be put into practice no later than July next year. The timeframe works for the government’s plans for the next election.
At Senator Xenophon’s request, the government is telling gas explorers to work on more undeveloped deposits under a “use it or lose it” edict, but this approach has already been in force under Labor and Coalition governments.
The government is also promising to enforce a “public interest” order on the big three liquefied natural gas exporters in Queensland to force them to pump more gas to the domestic market, something Mr Turnbull was doing anyway after meeting gas executives early last month.