Almost 900,000 Victorian businesses will share in a $3.2 billion tax cut in Scott Morrison’s biggest pitch for votes yet as Prime Minister.
The bold move — which could delay the federal Budget’s return to surplus — will deliver significant tax relief for small and medium-sized companies five years earlier than had previously been promised.
Tax rates for businesses turning over up to $50 million would be slashed from 27.5 per cent to 26 per cent in 2020-21, and down to 25 per cent in 2021-22. The cuts will deliver thousands of dollars a year back into the pockets of the nation’s army of self-employed, and a company making a $500,000 annual profit would pay $12,500 less.
Mr Morrison, who will detail his policy to turbocharge the economy today in his most significant announcement yet as Prime Minister, told the Herald Sun: “This will mean more investment, more jobs and higher wages.”
His pledge is in contrast to the stance of Opposition Leader Bill Shorten, who has vowed to freeze the corporate tax rate at 27.5 per cent.
Almost 6.6 million Australians, more than 1.5 million of them Victorians, own or work for businesses that turn over less than $50 million. Nationally, an estimated 3.29 million businesses — 886,000 of them in Victoria — should benefit.
Mr Morrison will today announce his intent to introduce legislation during the next session of federal parliament.
He will also bring forward the rollout of a 16 per cent tax discount for thousands of unincorporated businesses.
“This builds on the first stage of company tax relief … because we believe in a fair go for those who have a go — that’s what our tax plan is all about,” he said.
Mr Morrison said the changes would help to ensure Australian businesses were competitive and would help protect the economy and jobs.
Under the change, a small business, such as an independent supermarket or a pub that makes $500,000 profit, would have an additional $7500 in 2020-21 and $12,500 in 2021-22, to invest back into the business or into staff or help to manage cash flow.
Mr Morrison said the additional tax relief would be a “major test” for Mr Shorten to support Australian businesses, workers and jobs.
“Or is Bill Shorten’s only plan for the economy to introduce an extra $200 billion in taxes?” Mr Morrison said
“Our economic plan is working and the fast-tracking of tax relief for small and medium businesses is an important investment in the future economic growth of our nation.”
The move is expected to cost $3.2 billion over the next four years.
Caulfield South Plumbing’s Joel Day said he thought the tax cuts would make a “significant difference” for business owners in his industry.
“For the people who have their own business and/or are self-employed, it will be a big thing for them,” Mr Day said.
Under a previous plan to reduce taxes for big companies, the Budget was forecast to return to surplus in 2019-20 at $2.2 billion, before increasing to a projected surplus of $11.0 billion in 2020-21 and $16.6 billion in 2021-22.
Earlier this year, Mr Shorten dumped plans to repeal all of the government’s tax cuts for companies turning over from $10-50 million, after a fierce backlash from his party room and he business community. He instead vowed to freeze the corporate rate at the current 27.5 per cent.
The government also abandoned its contentious plan to slash taxes for big businesses after it failed to secure Senate support.
The government has passed a $140 billion income tax package that will deliver $530 tax refunds to 4.4 million low- and middle-income workers from next year, and then put every Australian earning up to $200,000 on a tax rate of 32.5c or lower.
Labor has pledged bigger income tax cuts for 10 million taxpayers. About four million would get $398 a year more than the government’s $530.