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12 October 2016

Tax cuts key for small firms - The Australian

By Kate Carnell

There is no doubt that small businesses lie at the heart of Australia’s economic engine room. Of course, businesses of all size have a role to play in keeping the economy afloat, so it’s fair to say that if the ‘SS Australia’ is going to successfully chart the rocky economic waters we’re currently navigating, we’ve got to keep our business – particularly small business – machinery humming.

At the risk of torturing the nautical analogy a little further, it’s worth noting that in some engine rooms, the machinery a ship needs to operate is often separated into different areas in order to minimise any potential damage.

Similarly, when it comes to company tax cuts – in light of the current bill – large and small businesses may need to be looked at separately, to ensure the small business sector isn’t disadvantaged by the apparent lack of political will that exists within the opposition and senate crossbench for the wholesale changes prescribed in the Turnbull Government’s Enterprise Tax Plan.

Nothing unites our politicians quite like small businesses do.  The substantial contribution our hard working mum-and-dad small business owners make to the economy is one of the few things law-makers on all sides can actually agree upon.  So it’s hardly surprising when measures designed to foster small business development and growth, are warmly embraced.

97 per cent of businesses in Australia are small business and the economic benefits of giving them all a tax cut shouldn’t be underestimated.  Politics is the art of the possible and reducing the tax burden to 27.5 per cent initially (progressively reaching 25 per cent by 2026/27) for businesses with a turnover of up to $10 million – along with increasing the tax discount for unincorporated small businesses – shouldn’t be seen as some sort of consolation prize.

When combined with measures such as the instant asset write-off, legislating the small business tax breaks will be significant for job creation and economic growth, particularly in rural and regional areas where the sustainability of so many communities is underpinned by small businesses; it’s how these communities survive.

The countless small business owners I’ve spoken to about the tax cuts say they will put the money they save back into their business, not into their back-pockets.  This means new plant and equipment, expansion and extra staff. 

Small businesses are already the biggest employer in Australia; as a nation we’re increasingly relying on the sector to keep people in jobs, drive growth and maintain our high living standards, particularly as we transition away from a resource-driven economy.  And when you consider there’s close to three million SMEs in Australia, if just a fraction of them employed one new worker each, it would be a game-changer.

Despite the benefits of lowering the company tax rate for all businesses, given the current economic and political climate, the path ahead for securing cuts for large companies is certainly politically difficult.  We shouldn’t risk tax cuts for small business for the sake of largescale changes; put simply, we must be careful not to throw the baby overboard with the bathwater.

First published via The Australian.